The two borrowing options to meet the GST Compensation requirement for 2020-21 consequent to the discussions in the 41st meeting of the GST Council held on 27th August, 2020 has been communicated to States, as per the document attached with this press note, to communicate their preference within seven working days. A meeting of State Finance Secretaries with the Union Finance Secretary and Secretary (Expenditure) is scheduled to be held on 1st September, 2020 for clarifying issues, if any.

 

GST compensation shortfall: two borrowing options proposed for states-Central special window or state market borrowings with cess repayment. States remain entitled to GST compensation for the transition period, but the GST Compensation Fund is insufficient for 2020 21; the GST Council must decide how to meet the shortfall and may recommend extension of the Compensation Cess. Two options are proposed: a Centre coordinated Special Window for State borrowing with Centre bearing part of interest margin and repayment from extended cess, or individual State market borrowings with principal to be repaid from future cess proceeds and interest met by States, alongside recalibrated borrowing limits.