Finance Ministry distributed GST Compensation dues to States


Posted on 15 July 2021


For Illustration Purpose Only.

The Finance Ministry distributed GST Compensation dues to States and Union Territories on Thursday, claiming that this will assist them plan their public expenditure for enhancing health facilities and other capital investment initiatives. These monies were raised through the Centre's market borrowings and passed on to States as back-to-back loans, accounting for 47.16 percent of the 1.59 lakh crore projected to be raised in this manner for States' GST compensation dues in 2021-22. While the GST Council approved these borrowings at its most recent meeting, Union Finance Minister Nirmala Sitharaman promised that a special meeting of the Council would be called to discuss issues relating to states' GST recompense, including their demand to extend the compensation period beyond five years. States owe around 63,000 crore for 2020-21, after borrowing 1.1 lakh crore in back-to-back borrowings to pay their compensation obligations. The Finance Ministry stated that its borrowing plan for the remainder of 2021-22, which was issued on March 31, remains unaltered. The 75,000 crore distributed to states was raised through the issuance of 5-year government securities worth 68,500 crore and 2-year government securities worth 6,500 crore this year, with weighted average annual yields of 5.60 percent and 4.25 percent, respectively.


Key Points


  • The Finance Ministry distributed GST Compensation dues to States and Union Territories on Thursday, claiming that this will assist them plan their public expenditure for enhancing health facilities and other capital investment initiatives.

  • The 75,000 crore distributed to states was raised through the issuance of 5-year government securities worth 68,500 crore and 2-year government securities worth 6,500 crore this year, with weighted average annual yields of 5.60 percent and 4.25 percent, respectively.