States push for larger share of central Taxes in 16th finance commission review
- In Reports
- 01:14 PM, Sep 13, 2024
- Myind Staff
Five states are advocating for a larger share of central taxes from the 16th Finance Commission, with Kerala Chief Minister Pinarayi Vijayan leading the charge for an increase in tax devolution to 50 percent. This development was reported by Hindustan Times.
At a recent conclave in Kerala, Vijayan highlighted the financial strain on states caused by rising surcharges and cesses, which are not included in the divisible tax pool. He urged the 16th Finance Commission to incorporate these surcharges and cesses into the overall tax revenue to ensure a fairer distribution of funds. This request was echoed by finance ministers from non-BJP-ruled states, including Karnataka, Tamil Nadu, Punjab, and Telangana.
Vijayan noted that surcharges and cesses have increased significantly over the past decade, now comprising about one-fifth of the Union’s gross tax revenue. This rise has reduced the shareable tax pool available to states. Kerala had previously sought a 50 percent share of tax devolution during the 15th Finance Commission's deliberations, citing an imbalance between the Centre's taxing powers and the states' spending responsibilities. However, the 15th Finance Commission had recommended a 41 percent devolution, down from the 42 percent suggested by the previous commission.
The demand for a larger share was supported by other participating states. Telangana Finance Minister Bhatti Vikramarka noted that cesses and surcharges now account for over 28 percent of the Centre’s gross tax revenue, further constraining state resources. Karnataka Revenue Minister Krishna Byre Gowda argued for a fairer distribution, stating that southern states contribute significantly to the national economy but are disadvantaged in tax devolution due to population-based criteria. Punjab Finance Minister Harpal Singh Cheema pointed out that while the implementation of GST was a major reform, it has limited states' fiscal autonomy.
Hosted by Kerala Finance Minister KN Balagopal, the conclave reflects a broader push for a more equitable tax-sharing mechanism as the 16th Finance Commission prepares its report, expected by early 2025.
Image source: moneycontrol.com
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