(FE)
The Centre is weighing a few options to give some revenue relief to state governments hit by the termination of the Goods and Services Tax (GST) compensation effective June 30, 2022. Under the new mechanism being worked out, states will get revenue protection much lower than a 14% annual growth enjoyed by them in the five years through June 30, and for a shorter period, say, two years.
The idea is to enable them to walk through the period of lower revenue growth till the GST itself produces the revenue buoyancy to address the states’ revenue concerns in the next three years, according to an official source.
Under one of the options, the Rs 2.7 trillion back-to-back loans taken by the Centre in the last two financial years, to address the shortfall in the GST compensation cess fund, will be restructured. This would mean that the repayment of these loans, arranged under a special RBI window at low costs, will be extended by a year or two from March, 2026. This would give the Centre additional liquidity to provide revenue protection to states for two more years, for revenue growth of 10-11%, the source said.
