From CK Nayak
Centre accepts Finance panel report; States’ share in taxes up
New Delhi: In a bonanza, the 14th Finance Commission has recommended a record 10 per cent increase in the states’ share in the Union taxes to 42 per cent, which has been accepted by the Centre. But Meghalaya will receive the least among the Northeastern states.
Addressing a press conference, Finance Minister Arun Jaitley said the Centre has accepted the recommendations of the Finance Commission and it shows NDA government’s commitment to cooperative federalism.
In a letter to all Chief Ministers, Prime Minister Narendra Modi said the increased money with states will give them the required freedom to tailor-make development schemes to suit their needs.
Besides raising the share of states in the divisible pool of central taxes from 32 per cent previously to 42 per cent, the Finance Commission also provided for Rs 2.87 lakh crore for five year period for Panchayats and Municipalities.
“The higher tax devolution will allow states greater autonomy in financing and designing of schemes as per their needs and requirements,” the report said.
All the NE states barring Arunachal Pradesh have been categorised as revenue-deficit states. Among them Meghalaya will receive only Rs 1,770 crore in the five years from 2015 to 2020 as grant in aid which is half of what Assam will receive.
As per the report Nagaland will receive highest amount of Rs 18,475 crores followed by Mizoram ( Rs 12,183 crore), Manipur ( Rs 10,227 crore), Tripura ( Rs 5,103 crore and Assam ( Rs 3,379 crore only).
A compositional shift in the Central allocations to States between tax devolutions and plan grants has been recommended too.
The recommendation is on the basis of demands from an overwhelming number of states that the number of centrally sponsored schemes be reduced and the states be given the freedom to spend as they decide rather than on the basis of policies formulated at the Centre.
Abhijit Sen, one of the four members of the Finance Commission, has submitted a dissent note suggesting that devolution to the states should be pegged at 38 per cent in the first year and should be maintained at that level unless there is an agreement to deal with the fiscal problems.
With regards to Goods and Services Tax (GST), the report said: “We expect that the final GST design would have all the characteristics of a good tax system such as broad base, low rate, minimum rate differentiation, low compliance cost and reduced distortions to the economy”. (With inputs from PTI)