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The Finance Ministry on Wednesday granted Tamil Nadu permission to increase an additional ₹9,627 crore via open market borrowings after the State formally communicated to the Centre its acceptance of the latter’s proposal that the States borrow from the market to meet the shortfall in GST compensation cess collections this yr.
“With today’s permission, 21 States have been granted permission to mobilise ₹78,542 crore so far,” the Finance Ministry mentioned, stressing that the permission granted “is over and above” the approvals wanted to allow the States to increase ₹1.1 lakh crore and meet the income shortfall arising out of GST implementation.
The Centre’s nod to Tamil Nadu comes two days after prolonged negotiations within the GST Council on the borrowing proposals failed to ship a consensus, with a number of Opposition-ruled States demanding that the Centre borrow to bridge the shortfall within the GST cess to compensate the States.
On Tuesday, the Expenditure Department within the Finance Ministry allowed 20 States to increase ₹68,825 crore from the market.
These States had picked the primary of the 2 choices provided by the Centre — letting the States to borrow ₹1.1 lakh crore of the ₹2.35 lakh crore estimated shortfall in GST cess collections in 2020-21 with out having to fear about principal and curiosity repayments. The second choice allowed States to increase ₹2.35 lakh crore whereas bearing the curiosity prices. It discovered no takers.
The Centre had argued that ₹1.1 lakh crore was the quantity that the States would have misplaced due to GST implementation, and may get full compensation for, whereas the remainder of the shortfall was due to exigencies ensuing from the COVID-19 pandemic. Apart from Tamil Nadu, Delhi and Jammu & Kashmir have additionally determined to train the primary choice.
A particular window is being created to facilitate GST-related borrowings, whereas the current nods for additional borrowing pertain to the additional borrowing flexibility of 0.5% of the Gross State Domestic Product (GSDP) that had been provided to States who opted for the primary choice for GST compensation.
“Under the terms of Option-1, besides getting the facility of a special window for borrowings to meet the shortfall arising out of GST implementation, States are also entitled to get unconditional permission to borrow the final instalment of 0.50% of GSDP out of the 2% additional borrowings permitted by the Government of India, under Atmanirbhar Abhiyaan on 17th May, 2020,” the Finance Ministry mentioned.
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