States will get this amount in the form of loans, no impact on fiscal deficit

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new Delhi. The central government will take a loan of Rs 1.1 lakh crore to meet the Goods and Services Tax (GST) compensation. The Finance Ministry has given information about this by tweeting on Thursday.

The ministry issued a statement saying that ‘to compensate for the reduction in GST compensation cess, the central government will borrow Rs 1.1 lakh crore. The ministry said that the loan amount will be carried forward to the states. This will be given to them one by one as loan against GST compensation cess. The statement said that the Center is assuming that all states will agree to it.

The Finance Ministry has said in a statement that the fiscal deficit will not be affected by this borrowing by the central government. This amount will be shown as the capital gain of the states. This would finance their respective fiscal deficits. It is to be known that the total amount of GST compensation is Rs 2.35 lakh crore. It has Rs 1.1 lakh crore as GST reduction.

States were given two options
Significantly, to compensate for the reduction in GST, the central government gave two options to the states in August. Under this, either they could take a loan of Rs 97 thousand crore through the special facility provided by the Reserve Bank or they could take a loan of Rs 2.35 lakh crore from the market. After the demand of some states, the special loan arrangement under the first option has been increased from Rs 97 thousand crore to Rs 1.11 lakh crore.

What is the matter of compensation
In fact, the country’s economy has suffered due to Kovid-19. Due to this, there has been a big decline in GST collections from states. Under the GST Act, states were promised revenue on the basis of a 14 per cent increase for any loss of revenue in the first 5 years after GST came into force from 01 July 2017. In this, it was proposed to compensate for any deficiency, by imposing GST cess on goods which are detrimental from the perspective of luxury and society.

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