Finance Ministry releases Rs.75,000 cr to States with Legislature under back-to-back loan facility in lieu of GST Compensation

New Delhi: Finance Ministry has released 75,000 crore rupees on Thursday 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 two months out of actual cess collection.

After the 43rd GST Council Meeting held on 28th of May, it was decided that the Central Government would borrow 1.59 lakh crore rupees and release it to States and UTs with Legislature on a back-to-back basis to meet the resource gap due to the short release of Compensation on account of inadequate amount in the Compensation Fund. 

This amount of 1.59 lakh crore rupees would be over and above the compensation in excess of 1 lakh crore rupees that is estimated to be released to States and UTs with Legislature during this financial year. The



sum total of 2.59 lakh crore rupees is expected to exceed the amount of GST compensation accruing in 2021-22.

All eligible States and UTs have agreed to the arrangements of funding of the compensation shortfall under the back-to-back loan facility. For assisting them in their endeavour, Ministry of Finance has frontloaded the release of assistance under the back-to-back loan facility during FY 2021-22.

75 thousand crore rupees, which is almost 50 percent of the total shortfall for the entire year, was released today in a single instalment. The balance amount will be released in the second half of 2021-22 in steady instalments.

Finance Ministry also said today’s release of 75 thousand crores does not change government’s borrowing programme in the first half of 2021-22.