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The Ministry of Finance has released the balance of Rs 44,000 crore to the states and union territories (UTs) as a loan to compensate for the Goods and Services Tax (GST) shortfall, taking the total amount to Rs 1.59 lakh crore in 2021-22. This release of funds as back-to-back loans is in addition to the bi-monthly GST compensation being given out of cess collection.

This amount of Rs 1.59 lakh crore is over and above the compensation, more than Rs 1 lakh crore (based on cess collection), that is estimated to be released to states/union territories with the legislature during this financial year.  The total of Rs 2.59 lakh crore is expected to exceed the amount of GST compensation accruing in FY 2021-22. The Rs 44,000 crore being released now is funded from the Government of India securities issued in the current financial year, at a Weighted Average Yield of 5.69 percent. 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. The ministry had on July 15 and October 7 released Rs 75,000 crore and Rs 40,000 crore, respectively, to the states.