BENGALURU: The State Finance Department is studying the Union Government’s request for an authorisation letter regarding payment of interest and repayment of debt from future GST compensation. The state is expected to send its response by October 16.Speaking to The New Indian Express, the state’s representative in the GST Council, Basavraj Bommai said, “After the Finance Department goes through it, we will put send it to the Chief Minister who will take a final decision on this.’’
Bommai said that the Union Finance Ministry had, in its letter dated October 15, said that to facilitate creation of the special window for borrowing at optimum cost and for easy servicing of debt, it is necessary to provide authorisation to the Central Government to make payment of interest and repayment of principal from the compensation payable to the state.
Authorisation will be binding on state govt
The letter said the interest on the borrowing will be paid from the GST compensation due to each state. After the transition period, the principal and interest will be paid from the proceeds of the cess by extending it beyond the transition period in accordance with the decision of the GST Council.
The central ministry said the repayment schedule could be spread out during the period of extension of cess beyond the transition period so that 50 to 67 per cent of the cess proceeds due to each state remaining after interest payments goes for repayment of debt and the remaining part is released to the states against arrears for compensation.
However, the actual proportion may vary based on fluctuation in actual cess collection, since structuring will be based on estimates of future cess, it pointed out. The authorisation will be binding on the state for the entire duration of the borrowing — until the amount is fully repaid.