Centre Transfers Rs 75,000 Crore to States In Lieu Of GST Compensation

Story Highlights
  • The Union Government releases Rs 75,000 crore to states as GST Compensation
  • The fund's transfer comes as an additional provision besides the two-month fund allocation
  • The additional fund transfer is expected to enable states to gear up against the possible third wave

New Delhi: The Union government transferred Rs 75,000 crore to states and union territories in lieu of the expected shortfall in GST Compensation cess in the current financial year.

 The Union finance ministry said in a statement that this is almost half of ₹1.59 lakh crore the Centre had agreed to transfer to states as part of GST compensation financed through borrowing and is in addition to another ₹1 lakh crore being transferred in instalments from GST cess collection. 

The recent fund transfer comes in addition to the GST compensation being released every two months out of actual cess collection.

It is reported that of the Rs 75,000 crore, Rs 68,500 crore was borrowed via five-year securities at a weighted average cost of 5.6%. The remaining was funded via two-year bonds at a weighted average yield of 4.25%

 Finance Secretary TV Somanathan in a media briefing said that the Union government has front-loaded the payment instead of giving weekly instalments as it wants to push the capital expenditure and make sure the states have reserved funds to battle the  possible third wave. It is also expected to help relieve the tension between Centre and opposition-ruled states over delays in GST compensation payments ahead of the monsoon session of Parliament beginning Monday. 

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