The Central government has released the ninth instalment of Rs 6,000 crore GST compensation payment to the states. The states and union territories have so far received Rs 54,000 crore of the `1.1 lakh crore to be disbursed by the Centre this fiscal.
The central government borrows the funds below a specific 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 5.15% even though the typical price for the complete borrowing so far is at 4.74%, the government stated.
While 23 states have been allotted Rs 5,516.6 crore in this round of weekly instalment, the remaining funds (Rs 483.4 crore) has been released to the 3 union territories with legislative assembly (Delhi, Jammu & Kashmir & Puducherry) which are members of the GST Council.
“The remaining 5 states, Arunachal Pradesh, Manipur, Mizoram, Nagaland and Sikkim do not have a gap in revenue on account of GST implementation,” the government stated.
Although GST regime has a mechanism of compensation cess fund, which is created up of cess proceeds, to be employed for compensating states in case of shortfall beneath their protected income each and 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, given 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 way of marketplace borrowing but several 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 concern and not Rs 1.85 lakh crore which is the income deficit that contains the pandemic-induced slowdown. After initial logjam, all the states at some point came on board with the borrowing scheme.
In addition to offering funds by way of the specific borrowing window to meet the shortfall in income on account of GST implementation, the central government has also granted added borrowing permission equivalent to .50% of Gross States Domestic Product (GSDP) to the states deciding on choice-I to meet GST compensation shortfall to enable them in mobilising added economic 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 stated.