• October 17, 2021

Finance Ministry releases Rs 40,000 cr to states, UTs to meet GST compensation shortfall

Finance Ministry on Thursday released 40,000 crore rupees to the States and UTs with Legislature under the back-to-back loan facility to meet the shortfall in GST Compensation. Earlier on 15th July this year, 75,000 crore rupees 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 to 1 lakh 15 thousand crore rupees. This release is in addition to normal GST compensation being released every 2 months out of actual cess collection.

Subsequent to the 43rd GST Council Meeting held on 28th May this year, it has been decided by the Central Government that it would borrow 1.59 lakh crore rupees in 2021-22 and release it to States and UTs with Legislature 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 Financial Year 2020-21, where an amount of 1.10 lakh crore rupees was released to States under a similar arrangement.

The amount of 1.59 lakh crore rupees to be provided to States as back to back loan would be over and above the compensation in excess of 1 lakh crore rupees based on cess collection that is estimated to be released to States and UTs with Legislature during the current financial year. The sum total of 2.59 lakh crore rupees is expected to exceed the amount of GST compensation accruing in Financial Year 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.

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