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Home Politics Centre To Borrow Rs 1.1 Lakh Crore For States' GST Shortfall

Centre To Borrow Rs 1.1 Lakh Crore For States’ GST Shortfall

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New Delhi: The finance ministry on Thursday, informed that the Central Government will borrow ₹1.1 lakh crore under the special window to meet the shortfall of Goods and Services Tax (GST) compensation.

“Under the Special Window to States for meeting the GST compensation cess shortfall, the estimated shortfall of ₹1.1 lakh crore (assuming all states join) will be borrowed by Government of India in appropriate tranches,” the finance ministry said.

The amount borrowed will be passed on to the states as “back-to-back loan in lieu of GST compensation cess” releases, the ministry added.

This borrowing will not have any impact on the fiscal deficit of the government.

The amount will be reflected as the capital receipts of the state governments and as part of financing of its respective fiscal deficits, it said.

The Centre borrowing on behalf of states is likely to ensure that a single rate of borrowing is charged and this would also be easy to administer.

“The states that get the benefit from the special window are likely to borrow a considerably lesser amount from the additional borrowing facility of 2 per cent of GSDP (from 3 per cent to 5 per cent) under the Aatmanirbhar Package,” the statement said.

On Monday, after the GST meeting, Nirmala Sitharaman, the finance minister had said the Centre cannot borrow and pay states for the shortfall as it would lead to rise in bond yields, resulting in rise in borrowing costs for the government and the private sector.

“If there are states which want to borrow we will facilitate and I have also kept completely the option open for states to come and talk. If they have any questions, I ready to engage with them,” she had said.

Earlier this week, the finance ministry had stated that around 21 states have accepted one of the two borrowing options suggested by the Centre.

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