Borrowing for GST Compensation
- October 15, 2020
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Subject: Economy
Context: Finance Ministry granted TN government permission to borrow 9627 crore rupees to meet the shortfall in GST compensation.
Concept:
- Due to pandemic situation , there is a heavy downfall in GST compensation cess collections.
- To meet the shortfall , central government has given two options for states,
a) Letting the States borrow 1.1 lakh crore of the 2.35 lakh crore estimated shortfall in GST cess collections in 2020-2021 , without having to worry about principal and interest payments.
b) Allowing the states to raise 2.35 lakh crore while bearing the interest costs(Not opted by states)
- Also, States are entitled to get additional borrowing flexibility of 0.5% of GSDP.