Centre clears second tranche of GST compensation, Rs 6000 Cr transferred to 16 states

The Centre on Monday released the second tranche of its pending GST compensation to 16 states and 3 Union Territories (UTs) transferring Rs 6000 crores under the 'Special Window to States for meeting the GST Compensation Cess shortfall'. About twenty-one states and three UTs, have opted for the Special Window under Option I, as per the Union Ministry of Finance.

As per the Ministry, the amount has been raised at a weighted average yield of 4.42 per cent and will be passed on to the states/UTs at the same interest rate which has been set lower than the cost of borrowings. The loans raised by Centre are being released on a back-to-back basis to states/UTs, in substitute of GST Compensation Cess releases.

Read: Centre Diverted GST Compensation Funds, Observes CAG; Shiv Sena Alleges 'breach Of Trust'

Read: Centre Releases First Tranche Of GST Dues, Rs 6000 Crores Transferred To 16 States & 2 UTs

On October 24, the Centre had released the first tranche of pending dues, transferring Rs 6000 crores to the states and UTs amid shortfall. According to the details put out by the Ministry of Finance, the borrowing has been set at an interest rate of 5.19 per cent and is intended to make weekly releases of Rs 6,000 crore to the States. The tenor of borrowing is expected to be broadly in the range of 3 to 5 years.

The states and UTs that benefit from this include Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh and Uttarakhand, and Delhi and Jammu and Kashmir. 

Earlier the Finance Ministry had rejected the demand of multiple states and proposed certain options for meeting the shortfall in GST compensation. Several state leaders such as Delhi CM Arvind Kejriwal, Jharkhand CM Hemant Soren, West Bengal CM Mamata Banerjee, Tamil Nadu CM Edappadi Palaniswami, Kerala CM Pinarayi Vijayan, Telangana CM K Chandrasekhar Rao, and Chhattisgarh CM Bhupesh Baghel had written to PM Modi urging a rethink on the GST compensation options.

Read: GST Collections For October Exceeds Rs 1 Lakh-crore Mark, First Time Since COVID Lockdown

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(With Agency Inputs)