The 15th Finance Commission has recommended a 92.3% increase in grants to states during the award period from FY 2022 to FY 2026.
- Cess-Surcharge had a share of 10.4% in FY 2011-12
- This difference arose due to the new policy of the 15th Finance Commission.
Cess and surcharge’s share in the central government’s gross tax revenue has increased to 19.9% in FY 2020-21. It has almost doubled to 10.4% for FY 2011-12. This has happened due to the 15th Finance Commission’s recommendation of more grants to states and less tax transfer. Rating agency India Ratings said this in a report on Tuesday.
Tax transfer to states declined by 41%
According to the current Finance Commission framework, the cess and surcharge collected by the central government is not part of the tax transfer. Under this framework states have been given more grants and less tax has been transferred. Due to this there has been a sharp growth in the share of cess and surcharge in central taxes. There has been a 41% decline in tax transfers to states during the tenure of the 15th Finance Commission.
Non-finance commission transfer to states also reduced
Principal economist Sunil Kumar Sinha of the rating agency says that the cess and surcharge participation in central taxes has increased due to lower tax transfers to states. He said that in the financial year 2019-20, the non-finance commission transfer by the Center to the states has come down to 48.6%. Non Finance Commission transfer to states was 53.4% in FY 2011-12. The Center has so far accepted proposals for grant of Rs 1.8 lakh crore from the states.
8 states’ share in central tax decreased
According to the latest Finance Commission award, 8 states’ share in central tax has come down. Andhra Pradesh’s share in this has fallen by 35 basis points (BPS) to 4.04%. Assam’s share fell 24 BPS to 3.13%, Karnataka’s share fell 118 BPS to 3.64%, Kerala’s share fell 60 BPS to 1.93%. Odisha’s share fell 22 BPS to 4.53%, Tamil Nadu’s share fell 2 BPS to 4.08%, Telangana’s share fell 40 BPS to 2.10% and Uttar Pradesh’s share fell 27 BPS to 17.94%.
Share of these states increased
According to the latest Finance Commission award, now Maharashtra’s share in central tax increased by 64 BPS to 6.32%, Rajasthan’s share increased by 38 BPS to 6.03%, Arunachal Pradesh’s share increased by 33 BPS to 1.76% and Gujarat’s share by 31 BPS to 3.48%. . The 15th Finance Commission has recommended a 92.3% increase in grants to states during the award period from FY 2022 to FY 2026.
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