Financial aid to states to meet GST compensation

In order to meet the shortfall in Goods and Services Tax (GST) compensation to be paid to States, the Government of India had set up a special borrowing window in October, 2020 to raise the estimated shortfall of ₹ 1.1 lakh crore.

This was stated by Shri Anurag Singh Thakur, Union Minister of State for Finance & Corporate Affairs, in a written reply to a question in Rajya Sabha today.

Giving more details, the Minister stated that an amount of ₹ 84,000 crore has been borrowed through this window by the Government of India upto 03.02.2021 on behalf of the States and Union Territories (UTs) with legislative assembly and has been passed on to the States/UTs as loan on back to back basis to help the States/UTs to meet the resource gap due to non-release of compensation due to inadequate balance in GST compensation fund.

The Minister stated that 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 % 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 an amount of ₹ 1,06,830 crore (0.50 % of GSDP) has been granted to 28 States under this provision.

State-wise details of back to back loan released to State Governments during the year 2020-21 to meet GST compensation shortfall and the amount of additional borrowing permission granted to States till 03.02.2021 is at Annexure.