Finance Ministry: ₹75,000 Crore Issued To States And UTs As GST Compensation Shortfall

The Ministry of Finance has allocated ₹75,000 crore to states and UTs with legislatures under the back-to-back credit facility in place of GST compensation today. This allocation is in addition to the regular GST payment made out of actual cess collection every two months.

Following the 43rd GST Council Meeting on 28th May 2021, it was concluded that the Central Government would borrow ₹1.59 lakh crore and release it to States and UTs with the legislature on a back-to-back basis to achieve the existing gaps caused by the short release of Compensation due to insufficient funds in the Compensation Fund.

Moreover, this figure is consistent with the principles taken for a comparable facility in FY 2020-21, when ₹1.10 lakh crore was made available to states under a similar mechanism. Furthermore, this figure of ₹1.59 lakh crore would be in addition to the compensation of more than ₹1 lakh crore (based on cess collection) that is expected to be released to States/UTs with legislatures during the current fiscal year.

The total value of ₹2.59 lakh crore is projected to exceed the amount of GST compensation due in the fiscal year 2021-22.