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Government narrows GST compensation shortfall :

The finance ministry has repaid Rs 78,000 crore out of Rs 1.10 lakh crore of the GST compensation shortfalls.

Till now, the government has released ~70% of GST compensation shortfall to the states and union territories (UTs). As per the finance ministry’s statement, the repaid amount of Rs 78,000 crore is borrowed at an average interest rate of 4.74%.

At the time of GST implementation, revenue loss was the major concern for states and UTs. But, the center had agreed to pay compensation to states and UTs as per their revenue shortfall.

As the pandemic jolted the revenues, the center was unable to honor that commitment in FY21. It resulted in a compensation shortfall for the states and UTs.

To fulfill its commitment, the government had proposed to set up a special borrowing window to meet the shortfall of Rs 1.10 lakh crore. Currently, ~70% of repayment has been made during this window.