By Our Reporter
SHILLONG, Feb 5: Chief Minister Conrad K. Sangma on Thursday said he met Union Finance Minister Nirmala Sitharaman in New Delhi on Thursday and shared a detailed analysis prepared by the state government highlighting the potential impact of the revised tax devolution formula on Meghalaya’s development plans. He said the Finance Minister responded positively and assured that the matter would be examined.
Informing that the Finance Commission report has been submitted to and accepted by the Government of India, he said the Commission is mandated to recommend the distribution of direct taxes, including income tax and corporate tax, collected at the national level. He said 41 per cent of the total tax collection is devolved to the states.
He explained that the horizontal distribution of this 41 per cent share among states is based on a formula comprising multiple criteria such as population, geographical area, income distance, fertility rate, and forest cover. He said earlier Finance Commission formulas had been favourable to smaller states like Meghalaya.
However, he said the latest Finance Commission has introduced an additional criterion linked to a state’s contribution to the GDP, giving added weight to states with higher economic contribution. He said this change has adversely affected most Northeastern states, with the exception of Assam, while benefiting larger states such as Maharashtra, Telangana, Andhra Pradesh, Karnataka, Kerala, Gujarat, and Tamil Nadu.
According to Sangma, Meghalaya, along with Arunachal Pradesh, Nagaland, Manipur, and Tripura, has been negatively impacted by the revised formula.
He said this could significantly affect the state’s growth prospects, particularly when compared with the momentum achieved through tax devolution under the 15th Finance Commission.
He said any modification to the devolution mechanism would have to be undertaken at the national level, as the policy applies uniformly to all states and cannot be tailored for individual states. He added that the Union Ministry would take time to assess the issue and continue consultations with the affected states.
The Chief Minister said the state government is hopeful of relief but added that clarity would only emerge once a final policy decision is taken by the Centre.
