Srinagar: The government of India has released Rs 2780 crore as Goods and Services Tax (GST) compensation to Jammu and Kashmir in the last four months under special borrowing scheme of the central government.
On October 7, the Union Ministry of Finance allocated Rs 967 crore to J&K as GST compensation; earlier on July 15, J&K was given Rs 1813 crore, taking the total of compensation received by J&K to Rs 2780 crore since July.
The central government has doled out GST compensation as the Covid pandemic affected the economy badly; there was a shortfall in GST collection.
To tide over the resource gap of states, the central government has released Rs 40000 crore as GST compensation out of which J&K will get Rs 967 crore.
A senior finance department official informed that Rs 967 crore has been released to J&K under a special borrowing scheme to meet the GST shortfall. Earlier in July we received Rs 1813 crore.
He further informed that J&K has received over Rs 8200 crore as GST compensation from July 2017 till date from centre post implementation of one tax one country regime.
Prior to this, in July, GoI had released Rs 75,000 crore GST compensation of which J&K received Rs 1813 crore.
As per the official statement of union finance ministry, an amount of Rs 40,000 crore was released to the States and UTs with Legislature under the back-to-back loan facility to meet the shortfall in GST compensation.
Earlier on 15th July, 2021 an amount of Rs 75,000 crore was released to the States and UTs with the legislature. With the current release, the total amount released in the current financial year as back to back loan in-lieu of GST compensation has reached Rs 1,15,000 crore. This release is in addition to normal GST compensation being released every 2 months out of actual cess collection.
Subsequent to the 43rd GST Council Meeting held on May 5, it has been decided by the Central Government that it would borrow Rs 1.59 lakh crore in 2021-22 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 collected in the Compensation Fund.
This amount is as per the principles adopted for a similar facility in FY 2020-21, where an amount of Rs 1.10 lakh crore was released to States under a similar arrangement.
This amount of Rs 1.59 lakh crore to be provided to States as back to back loan would be over and above the compensation in excess of Rs 1 lakh crore (based on cess collection) that is estimated to be released to States/UTs with Legislature during the current financial year. The sum total of Rs 2.59 lakh crore is expected to exceed the amount of GST compensation accruing in FY 2021-22.
All eligible States and UTs (with Legislature) have agreed to the arrangements of funding of the compensation shortfall under the back-to-back loan facility. For effective response and management of COVID-19 pandemic and a step-up in capital expenditure all States and UTs have a very important role to play. For assisting the States/UTs in their endeavor, Ministry of Finance has frontloaded the release of assistance under the back-to-back loan facility during FY 2021-22 of Rs 1,15,000 crore (more than 72 percent of the total estimated shortfall for the entire year). The balance amount will be released in due course.
The release of Rs 40,000 crore made today is funded from borrowings of GoI in 5-year securities, totaling Rs 23,500 crore and 2-year securities for Rs 16,500 crore issued in the current financial year, at a Weighted Average Yield of 5.69 and 4.16 percent per annum respectively. No additional market borrowing by the central government is envisaged on account of this release.
It is expected that this release will help the states/UTs in planning their public expenditure among other things, for improving health infrastructure and taking up infrastructure projects.