The Finance Ministry has said that the Centre will borrow up to 1.10 lakh crore rupees on behalf of the states to bridge the shortfall in GST collections. 

In a statement, the Ministry said, the amount so borrowed will be passed on to the states as a back-to-back loan in lieu of GST compensation cess releases. It said, the borrowing will not have any impact on the fiscal deficit of the Government of India. It added that the amounts will be reflected as the capital receipts of the state governments and as part of the financing of its fiscal deficits.

The Ministry said, it will avoid differential rates of interest that individual States may be charged for their State Development Loans and will be an administratively easier arrangement.

It also clarified that the General Government, borrowings will not increase by this step. It said, the States that get the benefit from the Special Window are likely to borrow a considerably lesser amount from the additional borrowing facility of 2 per cent of Gross State Domestic Product under  Aatma Nirbhar Package.

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