To compensate for the deficit of the Goods and Services Tax (GST), the central government has borrowed and transferred ₹6 billion rupees as the first tranche to 16 states and union territories under a special debt window, the Finance Ministry said on Friday. The interest rate has been set at 5.19%. The term of the debt will generally range from 3 to 5 years, the finance ministry added.
The 16 states and territories of the union are Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, MP, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, UP, Uttarakhand, Delhi, and Jammu and Kashmir.
The center is likely to launch weekly ₹6 billion rupees to the states, the Finance Ministry added.
The central government will borrow ₹Rs 1.1 million lakh under the special window to cover the GST compensation deficit, the Finance Ministry previously said. ₹Rs 2.35 million lakh. Of the total deficit, ₹Rs 1.1 million lakh is due to GST deficit.
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. Center loans on behalf of states are likely to guarantee a one-time loan fee and this would also be easy to administer.
The government previously issued a new loan plan by putting the additional amount on its schedule for the second half. Implement the special window to states to meet the GST compensation deficit of ₹1,10,000 crore, the Government of India (GoI) lending schedule is being modified in consultation with the Reserve Bank of India (RBI), according to an official statement.
“For the remaining period of fiscal year 2020-21 (October 19, 2020 to March 31, 2021), the Government of India will borrow a total amount of ₹4.88,000 crore. The additional amount to cover the GST compensation deficit will also be raised at the rate of ₹55 billion rupees in the terms of 3 and 5 years, “he said.
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