The Finances Ministry has informed that, in a bid to bridge the goods and services tax (GST) revenue shortfall, the central government has borrowed and transferred Rs 6,000 crore as the first tranche to 16 states and union territories under a special borrowing window.
The states that received GST compensation are Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand. The two Union Territories (UTS) are Delhi and Jammu and Kashmir.
Goa is facing close to 50% shortfall in GST collections in the current financial year, is owed Rs. 1018 crore as compensation, and the funds released by the Centre are part of the first tranche of compensation for the shortfall.
The shortage in funds has made it difficult for the state government to pay its employees’ salaries on time and beneficiaries of various schemes such as the Griha Aadhar and the Dayanand social security scheme have been waiting for four to six months to receive their monthly dues.
Despite taking steps to revive the economy, Goa’s GST revenues remain low, with the state accounting for Rs 240 crore in September against Rs 311 crore in September 2019, indicating a shortfall of 23%. August this year, saw the total GST collected at Rs 213 crore against Rs 325 crore earned last year during the same period.
Goa saw a 34% shortfall in GST collection in August whereas the national decline in GST revenues stood at 8% for August, indicating that Goa’s GST collections will continue to fall behind even as the country’s economy picks up.
Goa’s GST fell sharply, since the lockdown came into force from March onwards, and the state finance department reported a 91% decline in collections in April.
Goa has informed the Centre that it is in favour of borrowing funds through an RBI-facilitated special window to meet the GST shortfall for the current financial year. Chief Minister Pramod Sawant had written to Union finance minister Nirmala Sitharaman regarding the state’s preference for option 1, joining at least 12 other BJP-ruled states that made a similar choice.
However the Centre, gave in to the demands of opposition ruled states to borrow and fund the GST compensation shortfall. The finance ministry said that the Centre would borrow from the market to pay Rs 1.1 lakh crore to states and then act as intermediary to arrange back-to-back loans to state governments.
The ministry further stated that the government of India has evolved a special borrowing window to address the shortfall in GST collection during the year 2020-21. Twenty one states and two Union territories opted for this special window. This borrowing will not have any impact on the fiscal deficit of the government. The amount will be reflected as the capital receipts of the states and as part of financing of its respective fiscal deficits, it said.
As per the finance ministry, the borrowing is fixed at an interest rate of 5.19 per cent. Tenor of borrowing is expected to be broadly in the range of 3 to 5 years adding that it intends to release Rs 6000 crore to states every week.
In August, the Centre had proposed two options to state: borrow Rs 97000 crore (on account of GST implementation) from a special window facilitated by the RBI, or the complete shortfall of Rs. 2.35 lakh crore (including Rs 1.38 lakh crore due to Covid) from the market.
The options have since been revised to Rs 1.10 lakh crore and Rs 1.8 lakh crore respectively.
