Government Gives Rs 40,000 Crore To States As GST Compensation Shortfall

Government has released funds to states to compensate them for their GST compensation shortfall

Government has released Rs 40,000 crore to states to help them meet the shortfall in goods and services tax (GST) compensation.

The funds have been released by the Finance Ministry under the back to back loan facility and with this amount, a total of Rs 1,15,000 crore have been given to states in the current financial year as GST compensation shortfall.

This amount is apart from the normal GST compensation which is given on a bi-monthly basis to states out of the actual cess collection.

Prior to today’s release of funds, on July 15, Rs 75,000 crore had been given to states, official sources said.

During the meeting of the GST council, which was held on May 28, the government had decided to borrow Rs 1.59 lakh crore in the current fiscal to release to states on a back-to-back basis to help them meet their GST shortfall.

The amount of Rs 1.59 lakh crore is over and above the compensation in excess of Rs 1 lakh crore which is to be released to states during 2021-22 and is based on cess collections.

The amount of Rs 40,000 crore released on Thursday has been sourced from the government’s borrowings in five-year securities totaling Rs 23,500 crore and two-year securities for Rs 16,500 crore, all of which were issued during the current financial year (2021-22).

These funds will help the states to plan their public expenditure for improving the social infrastructure and finance projects.

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