GST compensation: Centre releases Rs 1206 Cr to Telangana, Rs 1684 Cr to Andhra

Of the total amount, Rs. 5,516.60 crore has been released to 23 States Rs. 483.40 crore has been released to the 3 Union Territories (UT) with Legislative Assembly (Delhi, Jammu and Kashmir, and Puducherry), which are members of the GST Council.

Around Rs. 1206.87 crore has been passed on to Telangana, while Rs 1684.89 Crores Andhra Pradesh.

The Constitution (One Hundred and First Amendment) Act, 2016, was the law that created the mechanism for levying a nationwide GST. Written into this law was a provision to compensate the States for loss of revenue arising out of implementation of the GST.

The adoption of the GST was made possible by the States ceding almost all their powers to impose local-level indirect taxes and agreeing to let the prevailing multiplicity of imposts be subsumed under the GST. While the States would receive the SGST (State GST) component of the GST, and a share of the IGST (Integrated GST), it was agreed that revenue shortfalls arising from the transition to the new indirect taxes regime would be made good from a pooled GST Compensation Fund for a period of five years that is set to end in 2022.

Till now, 65 percent of the total estimated GST compensation shortfall has been released to the States and UT with Legislative Assembly. Out of this, an amount of Rs. 65,582.96 crore has been released to the States and an amount of Rs. 6,417.04 crore has been released to the 3 UTs with Legislative Assembly.

The Government of India had set up a special borrowing window in October 2020 to meet the estimated shortfall of Rs.1.10 Lakh crore in revenue arising on account of implementation of GST. The borrowings are being done through this window by the Government of India on behalf of the States and UTs. 12 rounds of borrowings have been completed so far starting from October 23, 2020.

The amount released this week was the 12th installment of such funds provided to the States. The amount has been borrowed this week at an interest rate of 4.4315%. So far, an amount of Rs.72,000 crore has been borrowed by the Central Government through the special borrowing window at an average interest rate of 4.7024%.

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 mobilizing additional financial resources. All the States have given their preference for Option-I. Permission for borrowing the entire additional amount of Rs.1,06,830 crore (0.50 % of GSDP) has been granted to 28 States under this provision.