GST: Finance Ministry releases Rs 75,000 crore to compensate states for revenue shortfall

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The Finance Ministry on July 15 released Rs 75,000 crore to states make up for the shortfall in their revenues.

The amount released is in addition to the normal GST compensation that is paid bi-monthly to states out of the collections made from the levy of a cess on luxury and sin goods.

“The Ministry of Finance has released today Rs 75,000 crore to the States and UTs with legislature under the back-to-back loan facility in lieu of GST compensation. This release is in addition to normal GST compensation being released every 2 months out of actual cess collection,” it said.

All states and UTs (with Legislature) have agreed to the arrangements of funding of the compensation shortfall under the back-to-back loan facility.

The Centre has estimated the shortfall in GST compensation payable to the states in the current fiscal at Rs 2.59 lakh crore, of which about Rs 1.59 lakh crore would have to be borrowed this year.

“For effective response and management of Covid-19 pandemic and a step-up in capital expenditure, all States and UTs have a very important role to play. For assisting the States/UTs in their endeavour, Ministry of Finance has front-loaded the release of assistance under the back-to-back loan facility during FY 2021-22 Rs 75,000 crore (almost 50 per cent of the total shortfall for the entire year) released today in a single instalment. The balance amount will be released in the second half of 2021-22 in steady instalments,” it said.