The Central government has released the thirteenth instalment of Rs 6,000-crore GST compensation payment to the states, the government mentioned on Monday. The states and Union Territories have so far received Rs 78,000 crore of Rs 1.1 lakh crore to be disbursed by the Centre this fiscal.
The Central government borrows the funds below a unique window and passes it on to states in back-to-back loan arrangement. The interest price for the most up-to-date loan instalment was 5.31% even though the typical price for the whole borrowing so far is at 4.75%, the government mentioned.
While 23 states have been allotted Rs 5,516.6 crore in this round of weekly instalment, the remaining cash (Rs 483.4 crore) has been released to the 3 Union Territories with a 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,” the government mentioned.
Although GST regime has a mechanism of compensation cess fund, which is produced up of cess proceeds, to be employed for compensating states in case of shortfall under their protected income every year. This assure of income protection is baked into the law and the states are entitled to a 14% y-o-y development in their GST income.
However, considering the fact that final year, the compensation cess fund has proved to be inadequate for the objective. The Central government proposed this year that it would spend states by means of marketplace borrowing but lots of states didn’t agree with the Rs 1.1 lakh crore estimated shortfall.
The Centre insisted that it would only spend to the extent of shortfall due to GST implementation situation and not Rs 1.85 lakh crore which is the income deficit that incorporates the pandemic-induced slowdown. After the initial logjam, all the states ultimately came on board with the borrowing scheme.
In addition to delivering funds by means of the unique borrowing window to meet the shortfall in income on account of GST implementation, the Central government has also granted extra borrowing permission equivalent to .50 % of Gross States Domestic Product (GSDP) to the states selecting solution-I to meet GST compensation shortfall to aid them in mobilising extra monetary sources.
“All the states have been 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,” the government mentioned.