Final instalment of estimated GST compensation shortfall of Rs. 1.10 lakh crore to States released

New Delhi, March 16, 2021

The Department of Expenditure of the Union Ministry of Finance on Monday released the final weekly instalment of Rs 4,104 crore to the States to meet the Goods & Service Tax (GST) compensation shortfall.

Out of this, an amount of Rs. 4,086.97 crore has been released to 23 States and an amount of Rs. 17.03 crore to the three Union Territories (UTs) with the Legislative Assembly, an official press release said.

With this release, 100% of the total estimated GST compensation shortfall of Rs 1.10 lakh crore for the year 2020-21 has now been released to the States & UTs with Legislative Assembly, the release said.

Out of this, an amount of Rs. 101,329 crore has been released to the States and an amount of Rs. 8,879 crore has been released to the three UTs with the Legislative Assembly.

The Union Government 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 on behalf of the States and UTs. Starting on October 23, 2020, the borrowings were completed in 20 weekly instalments.

Under the special window, the Centre has been borrowing in Government stock with tenures of three years and five years. The borrowings made under each tenure are equally divided among all the States as per their GST compensation shortfall.

With this release, the proportionate pending GST shortfall to borrowing under both 5-year and 3-year tenure has been concluded for 23 States and 3 UTs with the legislature. The remaining five States do have any GST compensation shortfall.

The amount released this week was the 20th instalment of such funds provided to the States. The amount has been borrowed this week at an interest rate of 4.9288%. The total amount of Rs 1,10,208 crore has been borrowed by the Central Government through the special borrowing window at a weighted average interest rate of 4.8473%.

In addition to providing funds through the special borrowing window to meet the shortfall in revenue on account of GST implementation, the Government 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.

NNN