GST compensation: The central government will repay the states by borrowing Rs 1.1 lakh crore

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New Delhi, Thursday 15 October 2020

To compensate for the loss of Goods and Services Tax (GST), the central government on Thursday said it would borrow Rs 1.1 lakh crore through a special window, the finance ministry said in a tweet, adding that the central government would borrow Rs 1.1 lakh crore to offset the GST loss. Will take.

It said the Center was proceeding on the assumption that all the states would agree to it, adding that the loan would be taken for the appropriate portion, a statement issued by the ministry said, adding that the borrowed amount would be used by the states as bank-to-bank loans in return for GST losses. Will be given as.

This borrowing by the Central Government will not affect the fiscal deficit, this amount will be shown as the fiscal receipts of the states, and will correspond to the economic deficit of the respective fiscal deficit, GST compensation is a total of Rs 2.35 lakh crore, including GST. The reduction is Rs 1.1 lakh crore.

At the council meeting held in August 2020, the Center had suggested two options for reimbursing GST. One, the states will be provided a special window under which they can take loans from the Reserve Bank of India (RBI).

Of this, states can get loans of Rs 97,000 crore at low interest rates. This amount can be deposited from the cess collection till 2022. As an alternative, the central government had said that under the special window, Rs. 2.35 lakh crore loan can be taken.

The coronavirus is causing huge damage to the country's economy. This has led to a sharp decline in GST collection from the states of the country.

Under the GST Act, states were guaranteed compensation from July 1, 2017 for any revenue loss in the first five years of implementation of GST.

Moreover, in the base year of 2015-16, the states have calculated a reduction of 14 per cent annual growth in GST collection. States have promised compensation by 2022 to meet the revenue shortfall.

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