new Delhi. The central government has suggested the states to borrow from the current fiscal to compensate for the shortfall in the collection of Goods and Services Tax (GST). In a letter to the states and union territories, the Finance Ministry has mentioned the difficulties of the central government in paying GST compensation. The 12-page letter written by the Finance Ministry states that the current economic situation is such that the central revenue is affected more than the GST revenue. Indirect tax is associated with transactions and recovery in proportion to activity, while revenue from direct tax on profits has drastically reduced in the current situation.
At the same time, the revenue from direct tax on wages and salaries has also decreased drastically, while the revenue from customs duty on imports has also been affected.
The Finance Ministry said that the central government’s expenditure on the issue of national security along with the prevention of epidemics has increased. According to the letter, this problem is not just the center, but the national problem.
On the question of the central government’s borrowing to pay compensation, the ministry said that the central government already needs a large amount of borrowings this year.
The letter said that the yield on the securities of the central government would have an impact on the excess borrowings of the center, which could have major economic losses.
As per the options suggested by the Center to the states to compensate for GST compensation, if the states decide to meet the deficit of Rs 2,35,000 crore from market borrowings, then the additional unconditional lending limit is 0.5 per cent and from Corona As a relief, the final bonus installment of 0.5 per cent provided under the Self-Reliant India Package will not be available separately.
As a first option, the central government has given a special borrowing option of Rs 97,000 crore to the states in consultation with the Reserve Bank of India at an affordable interest rate. At the same time, as a second option, the central government has allowed states to compensate the deficit of estimated compensation of Rs 2,35,000 crore in the current financial year.
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