Centre releases first tranche of GST dues, Rs 6000 crores transferred to 16 states & 2 UTs

In a big relief to states, the Centre on Friday released the first tranche of pending GST dues, borrowing and transferring Rs 6000 crores to 16 states and two Union Territories (UTs), opening a special borrowing window to address the shortfall in the GST. "The Government of India has evolved a special borrowing window to address the shortfall in the GST collection during the year 2020 - 2021. 21 States and 2 Union Territories opted for this special window involving back-to-back borrowing coordinated by the Ministry of Finance," the Finance Ministry said in a statement.

According to the details put out by the Ministry of Finance, the borrowing is 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 fall under this are 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. Out of the aforementioned states and UTs, five states have not recorded a shortfall of GST compensation. 

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

Read: Rs.20,000 Crore Compensation Cess To Be Released Tonight; Impasse Over GST Dues Continues

Row over GST compensation 

Earlier the Finance Ministry had rejected the demand of multiple states and proposed two options for meeting the shortfall in GST compensation. First, it suggested that states could borrow Rs.97,000 crore (the revenue shortfall arising on account of GST implementation and not taking into account COVID-19) with the entire principal and interest repayment of the debt to be met through cess collection in subsequent years. Additionally, the states have been allowed to borrow an additional 0.5% points under the FRBM Act.

But if the states choose to borrow the entire amount of Rs. 2.35 lakh crore, only the principal amount shall be repaid from the cess. In such a scenario, the states will have to bear the interest burden. Several CMs 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: DMK MP Accuses FM Of Diluting GST Compensation Issue, Demands White Paper On Economy

Read: Tamil Nadu Gets Centre's Nod To Borrow Rs 9,627 Cr From Market To Plug GST Revenue Hole

(With Agency Inputs)