Centre releases Rs 6,195 crore to states as revenue deficit grants

Source: The Economic Times, Nov 10, 2020

The government released Rs 6,195 crore as the eight equated monthly installment of post-devolution revenue deficit grants to 14 states on Tuesday.

“Based on the 15th Finance Commission interim recommendations, the Govt has released Rs 6,195.08 crore to 14 states on account of the eighth equated monthly installment of Post Devolution Revenue Deficit Grant,” finance minister Nirmala Sitharaman’s office said in an update via Twitter.

The 14 states included Andhra Pradesh, Assam, Himachal Pradesh (HP), Kerala, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Sikkim, Tamil Nadu, Tripura, Uttarakhand and West Bengal.

Kerala received the highest amount of this batch of grants at Rs 1,277 crore followed by Rs 952 crore to HP and Rs 638 crore to Punjab.

Apart from the states’ share in the divisible pool of taxes collected by the Centre, the Finance Commission as part of its interim report for the current fiscal, had provided a mechanism for the compensation of states for revenue losses incurred called post-devolution revenue deficit grants.

The latest grant comes after the finance ministry recently released Rs 6,000 crore to 16 states and three Union Territories as part of the second tranche of the special window for goods and services tax (GST) compensation shortfall.
Both the Centre and states have been facing an acute revenue shortage on account of the pandemic and the lockdown. The tussle for funds between the two tiers of government came to a head recently in recent months on the issue of GST compensation shortfall.

It was only in October that GST collections crossed the Rs 1 lakh mark, indicating a revival in activity after the gross domestic product growth plunged by 23.9% in the first quarter of this fiscal.

As per official data available till September, the Centre’s shortfall in gross tax revenue stood at Rs 1.98 lakh crore against last year’s figures.

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