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Center releases Rs 40,000 crore balance to states as back-to-back loan for GST deficit


Narendra Modi’s government on Thursday released Rs 40,000 crore to States and Union Territories (UT) with the legislature under the back-to-back loan facility instead of GST compensation, said the Ministry of Finance in a press release.

“After taking into account the earlier version of Rs 1.15,000 crore (Rs 75,000 crore published on July 15, 2021 and Rs 40,000 crore published on October 7, 2021), the total amount released during the current financial year as a return – the repayment of the loan in lieu of GST compensation is 1,59,000 crore rupees, ”the finance ministry said.

This is in addition to the normal compensation for the GST which is released every 2 months from the actual collection of the housing tax.

“As a result of the 43rd GST Council meeting held on 05.28.2021, it was decided that the central government would borrow Rs 1.59 lakh crore and hand it over to states and UTs with the legislature back to back to fill the shortfall in resources due to the brief release of compensation due to the insufficient amount of the Compensation Fund, ”he said.

He said this amount was in line with the principles adopted for a similar facility in the 2020-21 fiscal year, where Rs 1.10 lakh crore was paid to states under a similar agreement. This amount of Rs 1.59 lakh crore would be added to the compensation, exceeding Rs 1 lakh crore (based on cess collection) which is expected to be remitted to States / UT with the legislature during this fiscal year. The total sum of Rs 2.59 lakh crore is expected to exceed the amount of the GST compensation accrued in the 2021-22 fiscal year, “the ministry said.

All eligible states and UTs (along with the Legislative Assembly) have agreed to the terms of financing the shortfall compensation under the Back-to-Back Loan Facility. For an effective response and management of the COVID-19 pandemic and increased capital spending, all states and UTs have a very important role to play. To assist the States / UT in their efforts, the Ministry of Finance anticipated the release of assistance under the back-to-back loan facility during the 2021-22 fiscal year of Rs 1,59,000 crore. he adds.

The current release of Rs 44,000 crore is financed by GoI borrowing in 5-year securities issued during the current financial year, at a weighted average yield of 5.69%. No further borrowing in the market by the central government is envisaged as a result of this publication.

(Edited by : Jomy Jos Pullokaran)

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