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As States are struggling to get more resources to fight the Covid-19 pandemic, the Centre has sanctioned the April instalment of Devolution of States’ share in Central Taxes and Duties amounting to over ₹46,000 crore.
This distribution has been made as per the recommendations of the 15th Finance Commission. It was recommended that 41 per cent of the net proceeds of Union Taxes should be shared with the States as against the present 42 per cent. The Commission felt that financial resources equivalent to 1 per cent of the net proceeds of Union Taxes should be retained with the Central Government for financing the requirements of newly formed Union Territories of Jammu & Kashmir and Ladakh. The government accepted the recommendation.
Technically, there is no change in the devolution formulae which means the States would continue to get 42 per cent share based on reworked criteria which includes population, demographic performance and tax effects. The new formula is for financial year 2020-21 only. Based on that, a sum of ₹46,038 crore has been sanctioned to 28 States of which Uttar Pradesh will get the maximum, followed by Bihar, Madhya Pradesh, and Maharashtra.
This year’s April instalment is less than the amount given for April 2019 (₹49,543.62 crore). One of the reasons could be that Budget 2020-21 estimated tax revenue to grow at 12 per cent, while for 2019-20 it was more than 18 per cent.
Advisory Council
Meanwhile, the Economic Advisory Council of the 15thFinance Commission will meet on April 23-24. This virtual meeting will be presided over by Chairman of the 15th Finance Commission, NK Singh, and attended by all members and senior officials of the Commission. The meeting will be attended by the five members of the Council:Krishnamurthy Subramanian, Sajjid Z Chinoy, Prachi Mishra, Neelkanth Mishra and Omkar Goswami.
The agenda for the Advisory Council Meeting is likely to include implications of the pandemic on GDP growth in 2020-21 and 2021-22, uncertainty over macrovariables over time, possible assumptions for tax buoyancy and revenue in the current year and next year and what the the public expenditure should be to shore up the economy.
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