Centre releases Rs 95,082 crore to states as January Tax devolution

The finance ministry on Thursday released Rs 95,082 crore to states, which includes an advance instalment of tax devolution of Rs 47,541 crore, almost double of their entitlement during the month of January.

"With the release of the second advance installment today, the states would have received an additional amount of Rs 90,082 crore under tax devolution over and above what has been budgeted to be released till January, 2022,” the Finance Ministry said in a statement.

The ministry claimed that this will help in strengthening the fiscal space of States and will help them to accelerate their capital and developmental expenditure to fight the CoVID-19 pandemic and to spur economic growth.

The centre has already released the back-to-back loan amounting to Rs. 1.59 lakh crore to state governments in lieu of GST Compensation shortfall in FY 2021-22 by the end of October 2021.

This will be the second advance instalment of tax devolution to states. Earlier, the centre had released the first advance instalment of Rs 47,541 crore on November 22, 2021.

On December 30 pre-budget meeting of state finance ministers, the centre asked the states to increase the capital expenditure, to help revive the economy. In the meeting, many states including Tamil Nadu, Bihar and Maharashtra had sought immediate release of many pending dues, including in some of the flagship programme, including the Pradhan Mantri Gram Sadak Yojana (PMGSY and MGNREGS works.

This advance release will help the states to pay pending dues and to increase allocation for spending on health and infrastructure projects.

Currently, 41% of the tax collected is devolved in 14 instalments among states during a fiscal. The increased amount of devolution in November is an advance release, and final adjustments will be made in March 2022.