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Centre to borrow Rs 1.1 lakh cr for GST compensation cess shortfall
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SME Times News Bureau | 15 Oct, 2020
The Union government will borrow around Rs 1.1 lakh crore in tranches
under a special window for lending to states in place of the GST
compensation cess.
A Finance Ministry statement on Thursday said
that the move will not have any impact on the fiscal deficit of the
government of India. The amounts will be reflected as the capital
receipts of the state governments and as part of financing of respective
fiscal deficits.
Under Option-I for the borrowing in place of
the GST compensation cess, states were to be provided a Special Window
of borrowing of Rs 1.1 lakh crore, and over and above that, an
authorisation for additional Open Market Borrowings (OMB) of 0.5 per
cent of their GSDP.
The authorisation for increased OMBs of 0.5
per cent of GSDP has been issued by Ministry of Finance on October 13
and are in relaxation of the reform conditions that were stipulated for
eligibility.
Additionally, under option-I, states are also
eligible to carry forward their unutilised borrowing space to the next
financial year, it said.
"Under the Special Window, the estimated
shortfall of Rs 1.1 lakh crore (assuming all states join) will be
borrowed by Government of India in appropriate tranches," said the
statement.
The amount so borrowed will be passed on to the states as a back-to-back loan in lieu of GST compensation cess releases.
This
will avoid differential rates of interest that individual states may be
charged for their respective State Development Loans (SDLs) and will be
an administratively easier arrangement.
It may also be clarified
that the General government (States + Centre) borrowings will not
increase by this step. The states that get the benefit from the Special
Window are likely to borrow a considerably lesser amount from the
additional borrowing facility of 2 per cent of GSDP (from 3-5 per cent)
under the 'Aatmanirbhar Bharat' package.
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