The central government will borrow ₹Rs 1.1 million lakh under the special window to cover the goods and services tax (GST) offsetting deficit, the Finance Ministry reported on Thursday. “In the framework of the Special Window for States to cover the GST compensation deficit, the estimated deficit of ₹The Government of India will borrow Rs 1.1 million lakh (assuming all states join) in the appropriate tranches, “the Finance Ministry said.
The loaned amount will be passed on to states as “consecutive loan releases rather than GST offsetting ceases,” the finance ministry said. This indebtedness will have no impact on the government’s fiscal deficit. The amount will be reflected as the capital income of state governments and as part of the financing of their respective fiscal deficits, the finance ministry said.
The total deficit in GST collection estimated at ₹Rs 2.35 million lakh. Of the total deficit, ₹Rs 1.1 million lakh is due to GST deficit.
During the August meeting, the Center presented two options to states to cover the GST deficit. The two options before states were: 1) A special window can be provided to states, in consultation with the Reserve Bank of India, at a reasonable interest rate for the loan of ₹1.1 million lakh rupees. The amount can be refunded after five years (of GST implementation) ending in 2022 from the collection of taxes. The GST panel had increased the loan limit from ₹Rs 1.1 million lakh instead of ₹97,000 crore on Monday. 2) The second option is to borrow the ₹Rs 2.35 million lakh deficit under special window.
The government will provide an additional 0.5% relaxation in the states’ debt limit under the FRBM Law as the second tranche of the first option, the finance minister said.
At least 21 states, including Tamil Nadu, Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Sikkim, Tripura, Uttar Pradesh and Uttarakhand have opted for the first option.
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