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Centre released 11th installment of ₹6000 cr to states

The Centre has released the 11th instalment of ₹6,000 crore to states as a back-to-back loan to meet the compensation shortfall in collection of goods and services tax, taking the total amount released so far through the special borrowing window to ₹66,000 crore.

After this release,now, more than 60% of the estimated GST compensation shortfall has been released to the states & UT with legislative assembly. Of this amount, ₹5,516.60 crore was released to 23 states and ₹483.40 crore to Delhi and the Union Territories of Jammu & Kashmir and Puducherry. Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation. 

The amount was borrowed this week at an interest rate of 5.1057%, while the average interest rate was 4.7271%. Out of the total amount, ₹60,066.36 crore has been released to the states and an amount of ₹5,933.64 crore has been released to the three Union Territory’s with Legislative Assembly. An additional borrowing permission of ₹1,06,830 crore has been granted to the states, it added, equivalent to 0.5% of their gross domestic product. 

All states have now taken the ₹1.1 lakh crore option, where the Centre will borrow the amount and transfer it to the states as loans. The Centre had offered the state two borrowing options : ₹97,000 crore and ₹2.35 lakh crore, with different sets of conditions for each to meet the GST compensation shortfall. The Centre sweetened the first option by increasing the borrowing to ₹1.1 lakh crore. 

Some states initially declined to take any of the options but later chose the first option. The Centre had set up a special borrowing window in October 2020 to meet the estimated shortfall arising on account of implementation of GST.

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