The Union government plans to make weekly releases of Rs 6,000 crore to the 21 states and 2 UTs that opted for borrowing under option 1.

FM Nirmala Sitharaman during a G20 meetPTI
Money GST Saturday, October 24, 2020 - 11:54

The Union government on Friday said that it borrowed and transferred Rs 6,000 crore as first tranche to 16 states on account of GST compensation under the special borrowing window.

The Union government has evolved a special borrowing window to address the shortfall in the GST collection during the year 2020-2021. In all, 21 states and 2 Union Territories have opted for this special window involving back-to-back borrowing coordinated by the Ministry of Finance.

Out of these, five states did not have any shortfall on account of GST compensation.

The Rs 6,000 crore has been transferred to Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand and the Union Territories of Delhi and Jammu and Kashmir.

The borrowing is at an interest rate of 5.19 percent. Tenor of borrowing is expected to be broadly in the range of 3 to 5 years.

The Union government plans to make weekly releases of Rs 6,000 crore to the states.

Last week, the Union government said that it would borrow the GST compensation on behalf of the states and then lend it back to states as back-to-back loans. The 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.

As part of GST compensation settlement formula evolved by the Centre, it is to borrow close to Rs 1,10,000 crore this year for back to back transfers to states towards meeting their GST compensation.

The borrowing and its interest is to be settled from realisations on account of GST compensation cess. The GST Council has allowed levy of cess beyond the five-year transition period ending June 2022 to clear all unmet compensation dues of states.

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