The 15th Finance Commission on Monday submitted to Prime Minister Narendra Modi its report on the ratio in which tax is to be divided between the Centre and states over the next five years. The report titled ‘Finance Commission in COVID Times’ would be submitted to Finance Minister Nirmala Sitharaman on Tuesday.
“The Chairman and Members of the 15th Finance Commission today presented a copy of the Commission’s report for the period 2021-22 to 2025-26,to Prime Minister Narendra Modi,” an official statement said. On November 9, the Commission had submitted its report to President Ram Nath Kovind.
15th Finance Commission Chairman N K Singh along with members of the commission, Ajay Narayan Jha, Anoop Singh, Ashok Lahiri and Ramesh Chand, were present on the occasion. “The report will be placed on the Table of the House along with Explanatory Memorandum by way of ATR (Action Taken Report) as prescribed under the Constitution,” the statement added.
Finance Commission is a constitutional body that gives suggestions on centre-state financial relations. The 15th Finance Commission submitted two reports – the first report consisted of recommendations for the financial year 2020-21 and the final report with recommendations for 2021-26.
While the previous 14th Finance Commission had recommended states be given 42 per cent of all taxes, the 15th Finance Commission had for 2020-21 recommended a total devolution of Rs 8,55,176 crore to the states, which is 41 per cent of the divisible pool of taxes. The recommendations of the 15th Finance Commission for period 2021-22 to 2025-26 have not been disclosed as it has not been tabled in Parliament.
The 14thFinanceCommissionhad increased states’ share by 10 percentage points to 42 per cent and it remains to be seen what its successor would do considering the Centre is hard-pressed for funds at a time when it is looking to boost the economy through expenditure. The Commission was asked to give its recommendations on wide-ranging issues. Apart from the vertical and horizontal tax devolution, local government grants, disaster management grant, it was also asked to examine and recommend performance incentives for states in many areas like power sector, adoption of direct benefit transfer, solid waste management etc.
TheCommission was also asked to examine whether a separate mechanism for funding of defence and internal security ought to be set up and if so how such a mechanism could be operationalised.
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