Union Govt Releases Rs 44,000 Cr To States To Compensate GST Shortfall

The Union Government on Thursday released a total Rs 44,000 crore to states under the back-to-back loan facility to compensate Goods and Services Tax (GST) taking the total to Rs 1.59 lakh crore in fiscal year (FY) 2022. 

In July, Prime Minister Narendra Modi led central government had released Rs 75,000 crore and Rs 40,000 crore earlier this month, after the ongoing COVID-19 pandemic affected revenue generation and in turn capital expenditure for states.

The Finance Ministry in a statement said, "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 1,59,000 crore."

"It is expected that this release will help the states and union territories in planning their public expenditure among other things, for improving, health infrastructure and taking up infrastructure projects," it added

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), which is estimated to be released to states 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 21-22, the ministry added in a statement.

"The release of Rs 44,000 crore being made now is funded from borrowings of GoI in 5-year securities issued in the current financial year, at a weighted average yield of 5.69 per cent. No additional market borrowing by central government is envisaged on account of this release," the ministry added.

The total amount released by the government to states now stands at Rs 2.69 lakh crore for FY21 and FY 22, to meet the resource gap due to the short release of compensation on account of inadequate amount in the compensation fund.