Centre Borrows, On-Lends Rs 6,000 Crore As GST Compensation To 16 States
Vehicles travel along a street near the Central Secretariat buildings in New Delhi. (Photographer:Anindito Mukherjee/Bloomberg)

Centre Borrows, On-Lends Rs 6,000 Crore As GST Compensation To 16 States

The central government has raised Rs 6,000 crore in market borrowings and passed the amount as loans to 16 states and three union territories for meeting the shortfall in goods and services tax collections.

The amount is the second tranche of back-to-back loans given to those states and union territories that chose option 1 to meet the GST compensation shortfall, the Ministry of Finance said in a statement. GST collections fell earlier this year due to Covid-19 outbreak, and slowing economic activity prior to the pandemic.

The loans have been released to Andhra Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Odisha, Tamil Nadu, Tripura, Uttar Pradesh, Uttarakhand, and the union territories of Delhi, Jammu and Kashmir, and Puducherry.

This amount was raised at a weighted average yield of 4.42%, and will be passed on to states and union territories at the same interest rate, according to the statement. On Oct. 23, the borrowing was done at an interest rate of 5.19%.

The borrowing for GST shortfall is done through regular weekly auctions of three to five-year tenor bonds, and the yield fluctuates based on market conditions.

So far, the central government has transferred Rs 12,000 crore to states and union territories under the special borrowing window.

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