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.
Borrowing for GST Compensation economy