NEW DELHI: The Centre will again borrow from a special window to pay states in order to make up for the expected shortfall in GST compensation cess, which it has estimated at Rs 1.58 lakh crore this fiscal year.
“On GST compensation cess, same formula as last year to be adopted this year too. The rough estimate is that the Centre will have to borrow Rs 1.58 lakh crore and pass it on to states,” Finance minister Nirmala Sitharaman said.
Last year the GST Council decided to borrow Rs 1.10 lakh crore, to pay the states in order to make up for the shortfall. “On the compensation, what we have told the Council is that if we adopt the same methodology and formula as last time, the gap is coming to about Rs 1.58 lakh crore at macro level. If we calculate at state level there could be a difference of a couple of thousand crore,” Revenue Secretary Tarun Bajaj told reporters.
He clarified that the shortfall exceeded the Rs 1.10 lakh crore last year, and this year, the Rs 1.58 lakh crore borrowing would help the Centre clear that pending compensation. The government, though, expects that unlike the last year, when there was a complete lockdown and the economy suffered severely, this year, the impact would be less severe.
“If we could collect on an average Rs 1.15 lakh crore a month, the deficit in compensation would be around Rs 1.25 lakh crore. So we could compensate the states for last year’s shortfall by another Rs 30,000 crore.We made this presentation in the meeting, and we would ask the states if they could borrow this amount. Simultaneously, we would approach the RBI,” Bajaj explained.
He added that the Department of Expenditure will soon write to the states on arriving at the exact amount borrowed and with a fresh borrowing proposal in this regard. The GST Council also decided to convene a special session in 2-3 months to discuss the extension of a protected revenue regime for states. Meanwhile, sources have said that all states are on board on the extension of the protected revenue system for another five years.