Centre releases Rs 40k cr to states/UTs to meet GST compensation shortfall

Total amount of Rs 1.15 trn released in current year to meet GST compensation shortfall


GST | GST compensation

IANS  |  New Delhi 

The Finance Ministry on Thursday released an amount of Rs 40,000 crore to the states and UTs with legislature under the back-to-back loan facility to meet the shortfall in GST compensation.

On July 15, an amount of Rs 75,000 crore was released to the states and UTs with legislature.

With the current release, the total amount released in the current financial year as back to back loan in-lieu of GST compensation has reached Rs 1,15,000 crore. This release is in addition to normal GST compensation being released every 2 months out of actual cess collection, a Finance Ministry statement said.

Subsequent to the 43rd GST Council Meeting held on May 28, it has been decided by the Central government that it would borrow Rs 1.59 lakh crore in 2021-22 and release it to states and UTs with legislatures on a back-to-back basis to meet the resource gap due to the short release of compensation on account of inadequate amount collected in the Compensation Fund.

This amount is as per the principles adopted for a similar facility in FY 2020-21, where an amount of Rs 1.10 lakh crore was released to States under a similar arrangement.

This amount of Rs 1.59 lakh crore to be provided to states as back to back loans would be over and above the compensation in excess of Rs 1 lakh crore (based on cess collection) that is estimated to be released to states/UTs with legislature during the current financial year. The sum total of Rs 2.59 lakh crore is expected to exceed the amount of GST compensation accruing in FY 2021-22.

All eligible states and UTs (with legislature) have agreed to the arrangements of funding of the compensation shortfall under the back-to-back loan facility.

Noting that all states and UTs have a very important role to play for effective response and management of the Covid-19 pandemic and a step-up in capital expenditure, the statement said that for assisting the states/UTs in their endeavour, the Finance Ministry has frontloaded the release of assistance under the back-to-back loan facility during FY 2021-22 of Rs 1,15,000 crore (more than 72 percent of the total estimated shortfall for the entire year). The balance amount will be released in due course.

The release of Rs 40,000 crore is funded from borrowings of GoI in 5-year securities, totalling Rs 23,500 crores and 2-year securities for Rs 16,500 crore issued in the current financial year, at a weighted average yield of 5.69 and 4.16 percent per annum, respectively. No additional market borrowing by the Centre is envisaged on account of this release.

It is expected that this release will help the states/UTs in planning their public expenditure among other things, for improving, health infrastructure and taking up infrastructure projects.



(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor


be the first to comment on this article

Leave a Reply

Your email address will not be published. Required fields are marked *

Take Me Top