Centre releases Rs 40,000 crore to states and UTs to meet GST compensation shortfall

New Delhi : The Centre on Thursday released Rs 40,000 crore to states and UTs under the back-to-back loan facility to meet the shortfall in GST compensation.

With this the total amount released in the current financial year as back to back loan in lieu of GST compensation stands at Rs 1.15 lakh crore.

This release is in addition to normal GST compensation being released every two months out of actual cess collection.

As decided in earlier GST Council meeting, the central government would borrow Rs 1.59 lakh crore in 2021-22 and release it to states and UTs 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,” Finance Ministry said in a release.

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

“For effective response and management of COVID-19 pandemic and a step-up in capital expenditure all states and UTs have a very important role to play. For assisting the States/UTs in their endeavour, Ministry of Finance has front-loaded the release of assistance under the back-to-back loan facility during FY 2021-22 of Rs 1,15,000 crore,” said Finance Ministry.

The balance amount will be released in due course, it added.

The release of Rs 40,000 crore made on Thursday is funded from borrowings of Government of India 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 central government 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,” Finance Ministry said.

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