Saturday, 04 December 2021

Centre releases GST loan amount of 44K crores to states

Center releases GST loan amount of 44K crores to states

On Thursday, the Centre released the balance of Rs 44,000 crore to states as a loan to compensate for a shortfall in Goods and Services Tax (GST) collections, bringing the total amounts to Rs 1.59 lakh crore this fiscal year. These funds are in addition to regular GST compensation being released every two months out of cess collections.

The Finance Ministry said on Thursday.

“It is expected that the release will help the states and Union Terroitiry in planning their public spending among other things, for improving, health infrastructure and taking up more infrastructure projects,”

The 43rd GST Council meeting on 28 May 2021 had decided that the Centre would take Rs 1.59 lakh crores in 2021-22 and release it to states and UTs with the legislatures.

Continuously meet the resource gap due to the shortfall in compensation because of the inadequate amount collected in the GST compensation funds. The amount is as per the idea adopted for a similar facility in 2020-21, where Rs 1.10 lac crore was released.

Center releases GST loan amount of 44K crores to states 1pixabay image

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The fund support comes at a time when many of the states are low on cash. While the Central government tax collections have become afloat due to a sharp spike indirect tax mop-up, many states are in a weak revenue position.

A senior official said.

“Covid has impacted many states disproportionately and many of them are now hard pressed for finance. Funding is key at state levels to step up capital spending and infrastructure creation,”

Aditi Nayar, chief economist, Icra, said The move is expected to cool off submission in upcoming bonds auction by states.

“The early release of the remaining amount of the continuous GST compensation loan to the states will help them to plan their spending in H2 FY2022, avoiding a bundle up at the end of the year. Moreover, it should help to press the size of the state development loan auctions in the immediate term, modestly cooling yields,”

On 15 July and 7 October, the Centre had released Rs 75,000 crores and Rs 40,000 crores, respectively, to states. On Thursday, the release of funds, the total amount that has reached a back-to-back loan instead of GST compensation is Rs 1.59 lakh crore.

The Rs 44,000 crore being released is funding from the Government of India securities issued in the current financial year. These securities have a tenure of 5 years and are issued at a weighted average yield of 5.69 percent. No additional market taken by the Central government is envisaging on account of this release.

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