NEW DELHI The central government said late Thursday that it was modifying its borrowing schedule for the second half to implement a special borrowing window aimed at states to close the income gap from the goods and services tax (GST).
Accordingly, the Center will borrow a total of ₹4.88 billion for the period from October 19 to March 31, according to an official statement. This indicates that the total indebtedness of the Center for the current fiscal year will be ₹13.1 trillion, compared to ₹12 trillion, he said on September 30.
“To put into operation the special window to the states to comply with the GST compensation ₹1,10,000 crore, the government of India’s borrowing schedule is being modified in consultation with the RBI, “an official statement said.
The additional amount to cover the GST compensation deficit will also be raised at the rate of ₹55 billion rupees over three and five year terms, he said.
According to the previous calendar published on September 30, the Center had to collect ₹56,000 crore in two tranches on October 5 and October 12, bringing the total loan for the second half to ₹5.44 trillion. The Center had already borrowed ₹7.66 billion in the first half.
Earlier in the evening, the Center made public the modality to facilitate that the states cover their deficit of this fiscal income derived from the implementation of the GST three years ago. Accordingly, the Center will borrow under the special RBI window and will loan it to the states.
The loans will show up as debt on the state books and the Center’s fiscal deficit will not be affected, it said in a statement. So far, 21 states and two union territories, Delhi and Jammu and Kashmir, have opted for this option to cover their GST revenue shortfall this year. The statement said that GST’s revenue shortfall of ₹The central government will borrow $ 1.1 trillion in the appropriate tranches and it will be transferred to the states “as a back-to-back loan in lieu of the GST offset release ceases.”
“The option decided is an iteration of option 1 previously proposed by the central government; with this apparently helping in operational convenience and uniformity in the interest rate on the proposed loan. It should now be seen if the same is acceptable to all states, “said Abhishek Jain, tax partner at EY.
Shortly after the Center released the modality to make it easier for states to cover their revenue shortfalls, Kerala Finance Minister Thomas Isaac said he welcomed the announcement that the Center will borrow through the special window. and it will provide back-to-back loans to states in lieu of GST compensation. .
But there is a problem that has not yet been resolved: how much of the compensation will be deferred until 2023? Negotiate this point and reach a consensus, “he said in a tweet. Isaac also said that states should receive full compensation payment from ₹2.3 billion this year. He also suggested that since under the new arrangement the additional loans do not affect the Center’s fiscal deficit, there was no reason for him to hesitate to borrow the full amount.
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