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Business EconomyPosted at: Oct 28 2021 5:23PM


Centre releases Rs 44,000 crores to states and UTs towards GST compensation shortfall

New Delhi, Oct 28 (UNI) The Centre on Thursday released Rs 44,000 crore to states and UTs under the back-to-back loan facility to fund GST compensation shortfall in current fiscal.
With the latest tranche, a total of Rs 1.59 lakh crore has been released to states and UTs under back-to-back loan mechanism.
"This release is in addition to normal GST compensation being released every two months out of actual cess collection," Finance Ministry said in a statement.
Subsequent to the 43rd GST Council meeting held on May 28 this year, it was decided that the central government would borrow Rs 1.59 lakh crore 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 in the Compensation Fund.
The amount was decided 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 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 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 statement said.
The release of Rs 44,000 crore being made now is funded from borrowings of Government of India in five-year securities issued in the current financial year at a weighted average yield of 5.69%. No additional market borrowing by 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," the Finance Ministry said.
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