Centre to release second tranche of Rs 6,000 crore to states as part of GST compensation

Centre to release second tranche of Rs 6,000 crore to states as part of GST compensation

The Centre will release the second tranche of Rs 6,000 crore to 16 states and 3 union territories on Monday, taking the total amount released to states to meet the compensation shortfall under goods and services tax (GST) under the special window to Rs 12,000 crore.

The second tranche was raised at a weighted average yield of 4.42 per cent, the finance ministry said in a statement.

“This amount will be passed on to the States/UTs at the same interest rate, which is lower than the cost of borrowings for the States and UTs, thus benefitting them,” the ministry said.

Till date 21 states and three union territories have opted for the special window under Option one where loans raised by the the government of India are released on a back-to-back basis to states or union territories, in lieu of GST compensation cess releases.

The loans have been released to Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand, UT of Delhi, UT of Jammu and Kashmir and UT of Puducherry.

The government had given two borrowing options to states to meet the compensation shortfall for 2020-21, of which Rs 1.1 lakh crore option was chosen by 21 states and two union territories.

Under this option, the Centre agreed to borrow and provide to states while the principal and interest will be serviced from the compensation cess collected. The special borrowing window coordinated by the finance ministry allows for back to back borrowing by the Centre and further transfer to states.

Some opposition-led states and union territories, including West Bengal, Rajasthan, Kerala, Chhattisgarh and Puducherry had rejected both the borrowing options provided by the Centre – Rs 97,000 crore and Rs 2.35 lakh crore.

They are also yet to decide whether to take the increased borrowing option of Rs 1.1 lakh crore, enhanced from Rs 97,000 crore earlier, basis a 7 per cent growth projection in revenues versus 10 per cent growth projection estimated by the finance ministry.

Finance minister Nirmala Sitharaman had written to these states last month, asking them to rethink their decision and come on board with the other states that will get faster access to funds.

Finance secretary Ajay Bhushan Pandey told ET in an interview that the government was open to discussion with states and will try to bring them on board.

“On revenue loss and other aspects, one can have discussions. I’m sure other states will also review their positions. We will try to convince them,” Pandey said.

Source: Economic-Times.

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