Govt of India provides Special Window to States for meeting GST shortfall

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The Government of India puts forth a special window of borrowing for states under Option-I for the borrowing of Rs 1.1 lakh crore or above, an authorisation for additional Open Market Borrowings of 0.5 per cent of their GSDP.

The authorisation for increased OMBs of 0.5 per cent of GSDP has been issued by the Ministry of Finance on October 13 and are in relaxation of the reform conditions that were stipulated for eligibility. Besides this, under Option-I, the States are also eligible to carry forward their unutilised borrowing space to the next Financial Year.

Also Read: India’s GDP to contract by 10.3% in FY 2020-21, says IMF

Under the Special Window, the estimated shortfall of Rs 1.1 lakh crore (assuming all States join) will be borrowed by the Government of India in appropriate tranches. 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 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 a part of the financing of its respective fiscal deficits. Further, this will avoid differential rates of interest that individual States may be charged for their respective SDLs and will be an administratively easier arrangement.

It may also be clarified that the General Government (the States and the Centre included) 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 two per cent of GSDP (from three per cent to five per cent) under the Aatma Nirbhar Package.

Also Read: GST Council reaches no consensus, 21 States nod to borrowing

(With Inputs from PIB)

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