The Union Territory has received ₹517 crore as compensation to offset the GST shortfall for the year, amid a troubling decline in revenue and heavy losses inflicted by the extended run of the COVID-19 pandemic.
The fund allotted for Puducherry was part of an estimated ₹75,000 crore released on Thursday by the Finance Ministry to the States and Union Territories.
When contacted, Chief Secretary Ashwani Kumar said the amount was released as a first tranche of the total resource gap estimation to the tune of ₹1,050 crore.
“Now, that the first tranche of the GST compensation has been released, the rest of the amount is expected to come in during the second half of the fiscal,” he said.
The Finance Ministry had released the funds as a cover for the decline in GST revenues during a downturn in the economy, precipitated further by pandemic-related losses. The funding is in addition to the normal GST compensation being released every two months out of the actual cess collection.
According to a Finance Ministry statement, this follows the decision at the 43rd GST Council Meeting held on May 28 that the Central government would borrow ₹1.59 lakh crore and release it to the States and Union Territories on a back-to-back basis to meet the resource gap.
The amount is as per the principles adopted for a similar facility in FY 2020-21, where ₹1.1 lakh crore was released to the States under a similar arrangement. The ₹1.59 lakh crore would be over and above the compensation in excess of ₹1 lakh crore (based on cess collection) that is estimated to be released to the States/UTs with legislature during this financial year. In the Ministry’s reckoning, the sum total of ₹2.59 lakh crore is expected to exceed the amount of GST compensation accruing in 2021-22.
The release of GST compensation has been funded from borrowings of the Government of India in 5-year securities, totalling ₹68,500 crore and 2-year securities for ₹6,500 crore issued in the current financial year, at a Weighted Average Yield of 5.6 and 4.25% per annum respectively.
The funds for Puducherry represented a share of the total estimated shortfall for the year. According to the breakdown of the amount, ₹472.19 crore is the amount released for the 5-year tenure while ₹44.81 crore is for the 2-year tenure.
The Ministry said it had frontloaded the release of assistance under the back-to-back loan facility during 2021-22 to the tune of almost 50% of the total shortfall for the entire year in a single instalment to help the States/UTs formulate a robust response to the COVID-19 situation and to step up capital expenditure. The balance amount would be released in the second half of 2021-22 in steady instalments, the Ministry said.
