Government Releases Rs.95,082 Crore as Tax Devolution to States

On Monday, the Central Government released two instalments of tax devolution amounting to Rs.95,082 crore to the state governments against the normal monthly devolution of Rs.47,541 crores. 

The Finance Minister, Smt. Nirmala Sitharaman had promised higher tax devolution after the virtual meeting with the chief ministers and state finance ministers to set up the state’s capital investment infrastructure on 15 November 2021. 

State-Wise BreakUp of Amount Released as Tax Devolution

On Tuesday, the Central Government provided the state-wise breakup of the amounts released as tax devolution to the states. As per the state-wise breakup of the amount released, Uttar Pradesh is the highest recipient with Rs.17,057 crore, followed by Bihar with Rs.9,563 crore, Madhya Pradesh with Rs.7,464 crore, West Bengal with Rs.7,153 crore, and Maharashtra with Rs.6,006 crore.

Release of Tax Devolution by Central Government

Usually, the government releases tax devolution to states in 14 instalments in a year and makes the adjustments according to the revised estimate in March. The Central Government released double the November tax devolution corresponding to the Budget Estimate to help states boost their capital expenditure. 

The release of the increased tax devolution for November is an advance release, and the Central Government will make the final adjustments in March 2022. The release of the tax devolution of Rs.95,082 crore will strengthen the infrastructure investment of the states. The Central Government has already released the entire back-to-back loan component of Rs.1.59 lakh crore to the state governments to compensate for the shortfall in the release of the GST compensation during the current fiscal.

The Central government has informed the states to undertake Rs.1.1 lakh crore additional CAPEX in FY22 against the achieved 5 lakh crore CAPEX of FY20.  The Central Government has allowed the states a net borrowing of 4% of GSDP in FY22, with 50 basis points linked to incremental CAPEX achievement over their investment in FY20.

The release of Rs.95,082 as tax devolution by the Central Government will boost the states’ capital infrastructure investment. It will help the states speed up infrastructure spending and increase the economic growth of India. 

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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