The Narendra Modi government on Thursday said it has released Rs 40,000 crore to the states and union territories to compensate them for the shortfall in GST revenue.
The finance ministry in a statement said, 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.
Earlier on July 15, 2021, an amount of Rs 75,000 crore was released to the states and UTs with the legislature.
The 43rd GST Council in its meeting on May 28 had decided that the central government would borrow Rs 1.59 lakh crore and release it to the states and UTs with the legislature on a back-to-back basis to meet the resource gap due to the short release of compensation on account of the inadequate amount in the compensation fund.
It further said 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 the loan 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," the ministry said.
"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, the ministry of finance 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 ministry added.
The release of Rs 40,000 crore made today is funded from borrowings of GoI in 5-year securities, totalling Rs 23,500 crore 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 added.
(Edited by : Jomy Jos Pullokaran)