GST compensation shortfall released to States reaches Rs. 1 lakh crore
Ministry of Finance

GST compensation shortfall released to States reaches Rs. 1 lakh crore

New Delhi, February 22, 2021

The Department of Expenditure in the Union Ministry of Finance on Saturday released the 17th weekly instalment of Rs 5,000 crore to the states to meet the GST compensation shortfall.

Out of this, an amount of Rs 4,730.41 crore goes to 23 States and Rs 269.59 crore to the three Union Territories (UT) with Legislative Assembly, Delhi, Jammu & Kashmir & Puducherry, which are members of the GST Council.

The remaining five states, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation.

Till now, 91% of the total estimated GST compensation shortfall has been released to the States and UTs with Legislative Assembly. Out of this, an amount of Rs 91,460.34 crore has been released to the States and Rs 8,539.66 crore has been released to the three UTs with the Legislative Assembly.

The 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.

Under the special window, the Centre has been borrowing in Government Stock with a tenor of 3 years and 5 years. The borrowing made under each tenor is equally divided among all the States as per their GST compensation shortfall.

With the current release, the proportionate pending GST shortfall in borrowing under 5 years tenure has been concluded for 16 States and 2 UTs. These States/ UTs were onboard for GST compensation release from the 1st Installment.

The amount released this week was borrowed at an interest rate of 5.5924%. So far, an amount of Rs 1,00,000 crore has been borrowed by the Central Government through the special borrowing window at an average interest rate of 4.8307%.

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.

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