New Delhi, Oct 28 ( KINS): The Ministry of Finance on Thursday released Rs 44,000 crore to the states and union territories with legislature under the back-to-back loan facility in lieu of GST compensation.
As per an official release, after taking into account the earlier release of Rs 1,15,000 crore (Rs 75,000 crore released on July 15, 2021, and Rs 40,000 crore released on October 7, 2021), the total amount released in the current financial year as a back-to-back loan in-lieu of GST compensation is Rs 1,59,000 crore. This release is in addition to normal GST compensation being released every two months out of actual cess collection.
Subsequent to the 43rd GST council meeting held on May 28, 2021, it was decided that the central government would borrow Rs 1.59 lakh crore and release it to states and union territories with the legislature on a back-to-back basis to meet the resource gap due to the short release of compensation on account of the inadequate amount in the compensation fund.
This amount is as per the principles adopted for a similar facility in Financial Year 2020-2021, 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 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, union territories with legislature 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 2021-2022.
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. For effective response and management of COVID-19 pandemic and a step-up in capital expenditure, all states and union territories have a very important role to play. 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.
The release of Rs 44,000 crore being made now is funded from borrowings of government in five-year securities issued in the current financial year, at a Weighted Average Yield of 5.69 per cent. No additional market borrowing by the central government is envisaged on account of this release.
It is expected that this release will help the states, union territories in planning their public expenditure among other things, for improving, health infrastructure and taking up infrastructure projects. ( KINS)