FM: GST compensation gap of over Rs two lakh crore can be met by states in consultation with RBI

States have been given two borrowing options to meet shortfall of GST compensation. After chairing the 41st GST Council meet yesterday, Finance Minister Nirmala Sitaraman said, the two options were placed before states so that each state does not have to struggle for loans.

Ms Sitharaman said, this year’s entire GST compensation gap of two lakh 35 thousand crore rupees can be met by the States, in consultation with RBI. She said, States have requested for details of both the options, and sought seven working days to deliberate on it and get back. These options will be available only for this year.

The Minister said, once the arrangement is agreed upon by GST Council, dues will be cleared fast and also take care of the rest of the financial year. She said, government will give a further relaxation of 0.5 per cent in States’ borrowing limit under FRBM Act. Finance Minister said there was no proposal to raise tax rates to make up for the shortfall that has been compounded by the COVID-19 pandemic.

Finance Secretary Ajay Bhushan Pandey has said, GST collection has been severely impacted due to covid pandemic.