As an alternative to the GST Compensation, the Ministry of Finance has today granted Rs. 75,000 crores to States and UTs with the Legislature under the back-to-back credit facility. Additional GST compensation will be provided every two months from real cess collections in addition to this one.
Because of this, on 28.05.2021, the 43rd GST Council Meeting resolved to borrow 1.59 lakh crore from the Central Government to cover the shortfall in Compensation Fund funding, which will be released to States and UTs with Legislature back-to-back. According to the principles adopted in FY 2020-21, a sum of Rs. 1,10, 000 crore was distributed to States under a similar structure. This amount is in line with those principles. Over and beyond the compensation in excess of Rs. 1 lakh crore (based on cess collection) expected to be distributed to States/UTs with Legislature in this financial year, this sum of Rs. 1.59 lakh crore will be provided. It is projected that the entire amount of 2.59 lakh crore would exceed GST compensation in FY 2021-22.
In order to pay the compensation gap, all qualifying states and UTs (along with their legislatures) have agreed to the funding arrangements under the back-to-back loan facility. It is critical that all States and U.S. territories work together to combat the COVID-19 epidemic and increase capital expenditures. 75, 000 crores (almost 50% of total shortfall for the full year) provided today in a single payment to help States/UTs in their endeavour has been frontloaded by Ministry of Finance under the back-to-back loan facility in FY 2021-22. The remaining funds will be made available throughout the course of the second half of 2021-22 in a series of equal monthly payments.
At an annual Weighted Average Yield of 5.60 percent, GoI issued 5-year securities totaling 68,500 crore and 2-year securities totaling 6,500 crore in the current financial year. These securities have a Weighted Average Yield of 4.25 percent.
This publication is designed to aid States/UTs in budgeting their public expenditures for a variety of purposes, including the improvement of health infrastructure and the implementation of infrastructure projects.