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Finance Ministry releases 16th instalment to states to meet GST compensation shortfall

An amount of Rs.4,597.16 crore has been released to 23 States and an amount of Rs.402.84 crore has been released to the 3 Union Territories (UT) with Legislative Assembly

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New Delhi: The Ministry of Finance has released the 16th weekly instalment of Rs.5,000 crore to the States on Monday (February 15, 2021) to meet the GST compensation shortfall.

Out of this, an amount of Rs.4,597.16 crore has been released to 23 States and an amount of Rs.402.84 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu & Kashmir & Puducherry) who are members of the GST Council. The remaining 5 States, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation.

Till now, 86 per cent of the total estimated GST compensation shortfall has been released to the States & UTs with Legislative Assembly. Out of this, an amount of Rs.86,729.93 crore has been released to the States and an amount of Rs.8,270.07 crore has been released to the 3 UTs with Legislative Assembly.

The Government of India had set up a special borrowing window in October 2020 to meet the estimated shortfall of Rs.1.10 Lakh crore in revenue arising on account of implementation of GST. The borrowings are being done through this window by the Government of India on behalf of the States and UTs. 16 rounds of borrowings have been completed so far.

The amount released this week was the 16th instalment of such funds provided to the States. The amount has been borrowed this week at an interest rate of 4.6480%. So far, an amount of Rs.95,000 crore has been borrowed by the Central Government through the special borrowing window at an average interest rate of 4.7831%.

In addition to providing funds through the special borrowing window to meet the shortfall in revenue on account of GST implementation, the Government of India has also granted additional borrowing permission equivalent to 0.50 % of Gross States Domestic Product (GSDP) to the states choosing Option-I to meet GST compensation shortfall to help them in mobilising additional financial resources. All the States have given their preference for Option-I. Permission for borrowing the entire additional amount of Rs.1,06,830 crore (0.50 % of GSDP) has been granted to 28 States under this provision.

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