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Centre Releases Rs 75,000 Crore To States & UTs As GST Compensation Shortfall

The Central Government on Thursday said it has released Rs 75,000 crore to the States and Union Territories to compensate them for the shortfall in GST revenue.

GST Compensation

PTI


The Central Government on Thursday said it has released Rs 75,000 crore to the States and Union Territories to compensate them for the shortfall in GST revenue. At the 43rd GST Council Meeting held on May 28, it was decided that the Centre would borrow Rs 1.59 lakh crore and release it to States and UTs to meet the resource gap due to the short release of compensation on account of the inadequate amount in the compensation fund.

"The Ministry of Finance has released today Rs 75,000 crore to the States and UTs with Legislature under the back-to-back loan facility in lieu of GST Compensation. This release is in addition to normal GST compensation being released every 2 months out of actual cess collection," the ministry said in a statement. 

It added that all eligible states and UTs (with the legislature) have agreed to the arrangements for the 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, the Ministry of Finance has front-loaded the release of assistance under the back-to-back loan facility during FY 2021-22 Rs 75,000 crore (almost 50 per cent of the total shortfall for the entire year) released today in a single instalment," it added. 

The balance amount will be released in the second half of 2021-22 in steady instalments.

GST Compensation to help states with public expenditure

The release of ₹75,000 crores is funded from borrowings of GoI in 5-year securities, totalling ₹68,500 crore and 2-year securities for ₹6,500 crores issued in the current financial year, at a Weighted Average Yield of 5.60 and 4.25 per cent per annum respectively.

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 ministry said. 

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