Centre releases 11th installment of Rs 6000 crore to states to meet GST compensation shortfall

The Centre has released the 11th instalment of Rs 6,000 crore to states as a back-to-back loan to meet the compensation shortfall in collection of goods and services tax, taking the total amount released so far through the special borrowing window to Rs 66,000 crore, the finance ministry said on Monday.

“Now, more than 60% of the estimated GST compensation shortfall has been released to the states & UT with legislative assembly,” the ministry said.

Of this amount, Rs 5,516.60 crore was released to 23 states and Rs 483.40 crore to Delhi and the Union Territories of Jammu & Kashmir and Puducherry. Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation.

The amount was borrowed this week at an interest rate of 5.1057%, while the average interest rate was 4.7271%.

Out of the total amount, Rs 60,066.36 crore has been released to the states and an amount of Rs 5,933.64 crore has been released to the three UTs with Legislative Assembly.

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

All states have now taken the Rs 1.1 lakh crore option, where the Centre will borrow the amount and transfer it to the states as loans.

The Centre had offered the state two borrowing options – 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.

Some states initially declined to take any of the options but later chose the first option. The Centre had set up a special borrowing window in October 2020 to meet the estimated shortfall arising on account of implementation of GST.