Centre releases full ₹1.59 lakh crore to States this FY as loan to compensate for GST shortfall

Apart from the balance ₹44,000 crore relased on Thursday, The Finance Ministry had on July 15 and October 7 released ₹75,000 crore and ₹40,000 crore, respectively

The Centre on Thursday released the balance ₹44,000 crore to States as loan to compensate for the GST shortfall, taking the total such amount to ₹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 ₹1.59 lakh crore in 2021-22 and release it to States and Union Territories 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 ₹1.10 lakh crore was released to states.

"The Ministry of Finance has released ₹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 ₹75,000 crore and ₹40,000 crore, respectively, to the States.

With the release of ₹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 ₹1.59 lakh crore, the statement added.

This amount of ₹1.59 lakh crore is over and above the compensation in excess of ₹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 ₹2.59 lakh crore is expected to exceed the amount of GST compensation accruing in FY 2021-22," the Ministry added.

The ₹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%. 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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