Comments
The Finance Ministry on Monday claimed that full amount of the estimated GST compensation shortfall of ₹1.10 Lakh crore for FY 2020-21 has been released to States and Union Territories with legislative assemblies.
Meanwhile, economic research agency ICRA has estimated GST compensation requirement of the state governments for FY 2021-22 at ₹2.7-3-lakh crore and the shortfall relative to the assessed cess collections at ₹1.6-2-lakh crore.
In a statement, the Finance Ministry said that it released ₹4,104 crore as last instalment of compensation shortfall. Out of this, an amount of ₹4,086.97 crore has been released to 23 States and an amount of ₹17.03 crore has been released to the 3 UTs with Legislative Assembly. Altogether States got over ₹1.01 lakh crore while UTs got over ₹8,800 crore.
In October, Centre set up a special borrowing window in October, 2020 to meet the estimated shortfall of ₹1.10-lakh crore in revenue arising on account of implementation of GST. It was an arrangement under which Centre borrowed on behalf of States/UTs and give it back-to-back. One of the key advantages was loan was available at lower cost and there was no burden on Centre’s finance. Starting from October 23, the borrowings were completed in 20 weekly instalments.
Under the special window, the Government of India has been borrowing in government Stock with tenure of 3 years and 5 years. The borrowings made under each tenure are equally divided among all the States as per their GST compensation shortfall. With the current release, the proportionate pending GST shortfall with respect to borrowing under both 5 years tenure and 3 year tenure has been concluded for 23 States and 3 UTs with legislature. Remaining 5 States doesn’t have any GST compensation shortfall.
The total amount of over ₹1.10-lakh crore crore has been borrowed by the Centre through the special borrowing window at weighted average interest rate of 4.85 per cent.
In addition to providing funds through the special borrowing window to meet the shortfall in revenue on account of GST implementation, the Government of India has also granted additional borrowing permission equivalent to 0.50 per cent of Gross States Domestic Product (GSDP) to the states choosing Option-I to meet GST compensation shortfall to help them in mobilising additional financial resources. All the States have given their preference for Option-I. Permission for borrowing the entire additional amount of over ₹1,06-lakh crore has been granted to 28 States under this provision.
ICRA’s Estimate for Next Fiscal
Jayanta Roy, Group Head (Corporate Sector Rating) at ICRA said: “Based on the Government of India’s estimate of gross domestic product (GDP) for FY2022, we project the enhanced borrowing of 1 per cent of gross state domestic product (GSDP) recommended for the state governments for FY2022 at ₹2.2 trillion. Our estimate of the shortfall in GST cess collections relative to the GST compensation requirement, is ₹1.6-2.0 trillion (one trillion means one-lakh crore), which is equivalent to a substantial 70-90 per cent of this enhanced borrowing limit.”
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.