Finance Commission invites suggestions from public on devolution of taxes between Centre, states
May 08, 2024
New Delhi [India], May 8 : The 16th Finance Commission on Wednesday invited suggestions/views from the general public, institutions and organisations for the allocation of resources between the centre and states along with the issues relevant to the working of the commission.
According to a release by Ministry of Finanace, "The commission has sought suggestion on the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I, Part XII of the Constitution and the allocation between the States of the respective shares of such proceeds".
"The principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India and the sums to be paid to the States by way of grants-in-aid of their revenues under article 275 of the Constitution for the purposes other than those specified in the provisos to clause (1) of that article" said the release.
It further added "The measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State".
The suggestions can be submitted through the website of the 16th Finance Commission (https://fincomindia.nic.in/portal/feedback) under the section 'Call for Suggestions'.
The 16th Finance Commission was constituted by the President on 31st December 2023 with Dr. Arvind Panagariya as Chairman. The commission has been constituted to make recommendations covering a period of five years commencing on 01st April 2026
Additionally, the commission is also mandated to review the present arrangements on financing Disaster Management initiatives, with reference to the funds constituted under the Disaster Management Act, 2005 (53 of 2005), and make appropriate recommendations thereon
According to the 15th Finance Commission's recommendations, the center should allocate 41 per cent of tax collection to states. This is known as vertical devolution. The distribution among states, or horizontal devolution, is based on several criteria like demographic performance, Income, population, area, forest and ecology, tax and measures to check fiscal deficit by individual states.
States with lower per capita incomes receive a higher share to maintain equity. However, states have often complained that the actual devolution is lower than the Finance Commission's recommendations due to cess and surcharge imposed by the Centre.
