Finance Minister Nirmala Sitharaman has countered the charge by the States that the Centre collects more money from cess and surcharge while devolution has come down by asserting that the money is indeed devolved to the States. Excerpts from the FM’s on the Finance Bill in the Rajya Sabha:
According to Article 271 of the Indian Constitution, all taxes and duties, except surcharges and cesses levied — after all, they are levied for specific purposes — shall be distributed between the Union and the States. The percentage of share for the States in the net proceeds is recommended by the Finance Commission and then it is accepted by the Centre from time to time.
According to Article 279 of the Indian Constitution, the net proceeds of shareable Central Taxes shall be certified by the Comptroller and Auditor General (C&AG). The share of the States for devolution in Central Taxes as projected under BE for 2021-22 was ₹6.6 lakh crores which has been revised to ₹7.45 lakh crores while the actual devolution would be ₹8.35 lakh crore. How did this come about? The net proceeds are arrived at from the gross tax revenue which includes cesses, surcharges and everything else. This is the gross tax revenue. Remove from it the cesses and the surcharges. Then remove from it the cost of collection which is net proceeds.
There is a fear that States are getting less. I just want to address that straightaway. The States’ share in 2019-20 was ₹6,83,353 crore. The actual for 2020-21 was ₹6,15,841 crore. In 2021-22, the Budget Estimates figure was ₹6,65, 563 crore. Then of 2020-21 and then for 2021-22, it was ₹6,65,563 crore. In 2021-22, the same year for which the B.E. was ₹6,65,563 crore, the Revised Estimates show you ₹7,20,557 crore.
Actually, it is ₹8.35 lakh crore only because I have had a long overdue amount which has been lying there since 2014-15. It was constantly being discussed with the CAG. It had to be paid to the States and the States had to give some amount to us. All this reconciliation has been going on since 2014-15. I take that up now, so that we know why in the actual, not just because of the net payable due, the net proceeds are higher on their own, but there is also this one-time payment which I have made this year and cleared ₹43,000 crore as on February 28.
From 2013-14 to 2022-23, which is including the forthcoming year from 1st April onwards, the actual utilization of Health and Education Cess is expected to be ₹3.94 lakh crore as against an estimated collection of ₹3.77 lakh crore. This cess is primarily funding Centrally sponsored schemes which happen in the States wherein the funds are being transferred to State Governments. Under, Central Road and Infrastructure Cess, the collection is expected to be ₹11.37 lakh crores from 2010-11 to 2022-23 and It is being utilized to create infrastructure such as road, railways, drinking water, health and telecom, etc and money goes to States only.