Centre kicks off GST compensation release under special borrowing scheme

  • The Centre borrowed and transferred 6,000 crore to 16 states and two union territories on Friday under the scheme
  • Out of the 21 states that opted for the borrowing scheme, five did not have any revenue shortfall to be compensated

Gireesh Chandra Prasad
Updated23 Oct 2020, 09:09 PM IST
The finance ministry had last week revised its borrowing calendar for the second half to accommodate the special borrowing scheme
The finance ministry had last week revised its borrowing calendar for the second half to accommodate the special borrowing scheme(PTI)

The Central government on Friday started weekly release of funds borrowed under a special RBI window to states that have opted for bridging their Goods and Services Tax (GST) revenue gap with debt.

The Centre borrowed and transferred 6,000 crore to 16 states and two union territories on Friday under the scheme, said an official statement. The fund release is part of a ‘back-to-back loan facility’ to states in lieu of GST Compensation. Kicking off the fund release to the states that have opted for the scheme puts pressure on dissenting states like Kerala, West Bengal and Punjab that are still weighing their options, to accept the scheme.

If all states agree, Centre will borrow 1.1 trillion, the estimated revenue shortfall of states this year due to GST implementation, and release to states. The finance ministry had last week revised its borrowing calendar for the second half to accommodate the special borrowing scheme, departing from its previous position that states ought to borrow. These borrowings will be shown as debt in the books of states and the Centre’s fiscal deficit will be unaffected.

“It is intended to make weekly releases of Rs.6,000 crore to the states. Tenor of borrowing is expected to be broadly in the range of 3-5 years,” said the finance ministry statement. The borrowing is at an interest rate of 5.19%.

Out of the 21 states that opted for the borrowing scheme, five did not have any revenue shortfall to be compensated.

The states that received funds are Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh and Uttarakhand. Union territories Delhi and Jammu and Kashmir too received funds, the statement said. This is the first time funds are being released as GST compensation for the current fiscal.

The Centre agreeing to borrow under the special RBI window had helped to diffuse some tension between New Delhi and the dissenting states. Kerala Finance minister Thomas Isaac had said in a tweet on Thursday that having reached a consensus on who should borrow, the centre and states can reach a consensus on how much to borrow. Isaac suggested that an incentive given to all the states joining the borrowing scheme—waiver of a reform condition proposed while raising states’ borrowing limit from 3% to 5% of gross state domestic product earlier this year—should be extended to all states. “Let GST Council meet and continue the dialogue,” he said in his tweet, indicating willingness to resolve the differences with the Centre.

Some of the dissenting states had earlier threatened to move court to resolve their differences with the Centre, saying their fund shortfall cannot be classified as GST implementation-related and pandemic-related.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.MoreLess
First Published:23 Oct 2020, 09:09 PM IST
HomeNewsIndiaCentre kicks off GST compensation release under special borrowing scheme

Get Instant Loan up to ₹10 Lakh!

  • Employment Type

    Most Active Stocks

    Bharat Electronics

    312.60
    03:59 PM | 22 JUL 2024
    6.3 (2.06%)

    Zee Entertainment Enterprises

    134.60
    03:59 PM | 22 JUL 2024
    -2.95 (-2.14%)

    Tata Steel

    160.35
    03:57 PM | 22 JUL 2024
    2.6 (1.65%)

    Wipro

    505.75
    03:59 PM | 22 JUL 2024
    -51.5 (-9.24%)
    More Active Stocks

    Market Snapshot

    • Top Gainers
    • Top Losers
    • 52 Week High

    Rashtriya Chemicals & Fertil

    235.05
    03:53 PM | 22 JUL 2024
    21.1 (9.86%)

    NBCC India

    184.85
    03:52 PM | 22 JUL 2024
    13.05 (7.6%)

    Indian Hotels Company

    620.20
    03:54 PM | 22 JUL 2024
    42.95 (7.44%)

    Chalet Hotels

    820.00
    03:29 PM | 22 JUL 2024
    55.9 (7.32%)
    More from Top Gainers

    Recommended For You

      More Recommendations

      Gold Prices

      • 24K
      • 22K
      Bangalore
      75,510.00293.00
      Chennai
      75,657.000.00
      Delhi
      75,217.00732.00
      Kolkata
      75,144.00659.00

      Fuel Price

      • Petrol
      • Diesel
      Bangalore
      102.86/L0.00
      Chennai
      100.98/L0.23
      Kolkata
      104.95/L0.00
      New Delhi
      94.72/L0.00
      OPEN IN APP
      HomeMarketsPremiumInstant LoanBudget