Centre’s Borrowing Option to Meet GST Shortfall

Rajasthan government has accepted the Centre’s borrowing proposal to meet GST revenue shortfall and will get over Rs 4,600 crore through the special window. The Government of Rajasthan has communicated its acceptance for Option-1out of the two options suggested by the Ministry of Finance to meet the shortfall in revenue arising out of GST implementation.

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Key-Points

The Finance Ministry had said last month that the Centre would borrow from the market and then act as an intermediary to arrange back-to-back loans to pay the GST compensation shortfall of Rs 1.1 lakh crore to state governments. This arrangement will not reflect in the fiscal deficit of the Centre, and will appear as capital receipts for state governments.

Under the special window, the Centre has already borrowed Rs 12,000 crore in two equal instalments and passed it on to 21 states and three Union Territories on October 23 and November

The second round of borrowing was done at an interest of 4.42%, and the first round at 5.19%, lower than the cost of borrowing for states.