Govt agrees to lower sharing of tax proceeds with states

New Delhi, Feb 2 The Finance Ministry has accepted the 15th Finance Commission's recommendation to share 41 per cent of the net proceeds of Union taxes with the states against the current 42 per cent, among other recommendations.

The commission was of the view that financial resources equivalent to 1 per cent of the net proceeds of Union taxes should be retained with the Centre for financing the requirements of the newly-formed Union Territories of Jammu & Kashmir and Ladakh. Similar, sharing of revenues were earlier also proposed by year 2020-21 for which the commission presented a report to the President in December 2019.

The government has also accepted the recommendation of post-devolution revenue deficit grants amounting to Rs 2,94,514 crore for 17 states over 2021-22 to 2025-26. The number of states qualifying for the revenue deficit grants decrease from 17 in 2021-22, the first year of the award period, to six in 2025-26, the last year of the grant period.

The panel has also recommended grants-in-aid revenues of states for revenue deficit, local bodies, disaster management, sector-specific and certain state specific under Art 277 of the Constitution. The Centre has accepted this suggestion too.

Further, the recommendation of total grants for duly-constituted local government that add up to Rs 4.36 lakh crore for the period 2021-26, has also been accepted.

The N.K. Singh-led 15th Finance Commission, also recommended for providing of grants to state governments in eight different sectors including health, school education, higher education and agriculture. It suggested providing grants worth Rs 1.29 lakh crore during the five-year award period.

The Finance Ministry has said that it would give due consideration to the sectors identified while formulating and implementing existing and new centrally sponsored and central sector schemes.