Centre Releases 6th Installment of Rs. 6000 crs to States to Meet GST Compensation Shortfall

The Centre released the sixth installment of Rs.6,000 crore to states as back to back loan to meet the goods and service tax (GST) compensation shortfall, taking the total amount released so far through the special borrowing window to Rs.36,000 crore, the finance ministry said on Wednesday, 10 December 2020.

Of this, an amount of Rs. 5,516.60 crore has been released to 23 states and Rs.483.40 crore to three union territories Delhi, Jammu & Kashmir & Puducherry.

The remaining five states - Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim - do not have a gap in revenue on account of GST implementation.

"The amount has been borrowed this week at an interest rate of 4.2089%," the ministry said, adding that the average interest rate was at 4.7106%.

An additional borrowing permission of Rs.1,06,830 crore has been granted to states, it added, equivalent to 0.5% of states’ gross domestic product.

All states have now taken the Rs 1.1 lakh crore option where Centre will borrow the amount and transfer to the states as loans on a back-to-back basis.

The Centre had put two options of borrowing - Rs 97,000 crore and Rs 2.35 lakh crore - with different sets of conditions, for each to meet the GST compensation shortfall. The Centre sweetened the first option by increasing the borrowing to Rs 1.1 lakh crore. The second option was taken off the table as no state was interested.

States like Jharkhand, Chhattisgarh, Punjab, West Bengal and Kerala which had initially decided not to take any of the borrowing options, have now come on board by taking the first option.