With the release of second tranche, the Finance Ministry has facilitated loans of Rs 12,000 crore till date under the Special Window.

FM Nirmala Sitharaman wearing a mask speaking at a press briefing
Money GST Monday, November 02, 2020 - 19:15

To compensate for the Goods and Services Tax (GST) shortfall, the Union government has borrowed and will be transferring Rs 6,000 crore as the second tranche to 16 states and three Union Territories under special borrowing window, the Finance Ministry said on Monday.

This amount was raised at a weighted average yield of 4.42 per cent. The amount will be passed on to the states/UTs later in the day at the same interest rate, which is lower than the cost of borrowings for the states and UTs, thus benefitting them, it added.

With the release of second tranche, the Finance Ministry has facilitated loans of Rs 12,000 crore till date under the Special Window.

Out of the 21 states that opted for the borrowing scheme (option 1), five did not have any revenue shortfall to be compensated. States are expected to get, as onward lending by the Centre to them, an amount equivalent to Rs 1,10,000 crore in FY21. This is the amount of shortfall in compensation estimated by the Centre owing to GST.

The loans have been released to the following states and Union Territories - Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand, and the UTs of Delhi, Jammu and Kashmir, and Puducherry.

Earlier, the Union government had transferred Rs 6,000 crore on October 23 as the first tranche to these states and union territories. 

After a long stalemate between states and the Union government over who would borrow to compensate states for shortfall in GST revenue, the Union government had said in October that it would borrow the GST compensation of Rs 1.1 lakh crore on behalf of the states and then lend it back to them as back-to-back loans. 

The Finance Ministry said at the time that principal and interest payments would be done from the compensation pool and the amount to be borrowed will be mobilised through issuance of bonds having tenure of three to four years.

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