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Centre releases Rs 40K cr to states in lieu of GST compensation shortfall
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SME Times News Bureau | 07 Oct, 2021
The Finance Ministry on Thursday released an amount of Rs 40,000 crore
to the states and UTs with legislature under the back-to-back loan
facility to meet the shortfall in GST compensation.
On July 15, an amount of Rs 75,000 crore was released to the states and UTs with legislature.
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, a Finance
Ministry statement said.
Subsequent to the 43rd GST Council
Meeting held on May 28, it has been decided by the Central government
that it would borrow Rs 1.59 lakh crore in 2021-22 and release it to
states and UTs with legislatures on a back-to-back basis to meet the
resource gap due to the short release of compensation on account of
inadequate amount collected in the Compensation Fund.
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 loans 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.
All eligible states and UTs (with legislature) have
agreed to the arrangements of funding of the compensation shortfall
under the back-to-back loan facility.
Noting that all states and
UTs have a very important role to play for effective response and
management of the Covid-19 pandemic and a step-up in capital
expenditure, the statement said that for assisting the states/UTs in
their endeavour, the Finance Ministry 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
release of Rs 40,000 crore is funded from borrowings of GoI in 5-year
securities, totalling Rs 23,500 crores 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 Centre 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.
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