Centre releases full Rs 1.59 lakh cr to states this fiscal as back-to-back loan to compensate for GST shortfall

By: |
October 28, 2021 6:30 PM

This release of funds as back-to-back loans is in addition to the bi-monthly GST compensation being given out of cess collection.

With the release of Rs 44,000 crore on Thursday, the total amount released in the current financial year as back-to-back loan in-lieu of GST compensation is Rs 1.59 lakh crore, the statement added.With the release of Rs 44,000 crore on Thursday, the total amount released in the current financial year as back-to-back loan in-lieu of GST compensation is Rs 1.59 lakh crore, the statement added.

The Centre on Thursday released the balance Rs 44,000 crore to states as loan to compensate for the GST shortfall, taking the total such amount to Rs 1.59 lakh crore this fiscal.

This release of funds as back-to-back loans is in addition to the bi-monthly GST compensation being given out of cess collection.

The 43rd GST Council meeting on May 28, 2021, had decided that the Centre would borrow Rs 1.59 lakh crore in 2021-22 and release it to states and UTs with legislature on a back-to-back basis to meet the resource gap due to the shortfall in compensation on account of inadequate amount collected in the GST compensation fund.

This amount is as per the principles adopted for a similar facility in the last fiscal 2020-21, where Rs 1.10 lakh crore was released to states.
“The Ministry of Finance has released Rs 44,000 crore today to the States and UTs with Legislature under the back-to-back loan facility in lieu of GST Compensation,” the ministry said in a statement.

The ministry had on July 15 and October 7 released Rs 75,000 crore and Rs 40,000 crore, respectively, to the states.

With the release of Rs 44,000 crore on Thursday, the total amount released in the current financial year as back-to-back loan in-lieu of GST compensation is Rs 1.59 lakh crore, the statement added.

This amount of Rs 1.59 lakh crore is over and above the compensation in excess of Rs 1 lakh crore (based on cess collection) that is estimated to be released to states/union territories with legislature during this 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,” the ministry added.

The Rs 44,000 crore being released now is funded from the Government of India securities issued in the current financial year, at a Weighted Average Yield of 5.69 per cent. 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,” it said.

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