While the Finance Ministry has been asking the Fifteenth Finance Commission for a lower limit for tax devolution to the States, the Chairman’s office told The Hindu that the Centre’s plea was just one among 30 different requests, including those from the States, and that the Commission would decide its devolution formula independently after balancing all the requests.
The Fourteenth Finance Commission had recommended that 42% of the Centre’s tax revenue be transferred to the States, a significant increase from the recommendations of the previous Finance Commission.
The Fifteenth Finance Commission (FFC) has been tasked with, among other things, reviewing this percentage and changing it if need be for the five years starting April 1, 2020.
Downwards review
Officials in the Finance Ministry told The Hindu that the Ministry had in the past asked the FFC to review downwards the devolution percentage.
However, Finance Minister Nirmala Sitharaman, when asked about this on Friday, said that she had not written to the FFC about this.
It is learnt that the earlier pieces of communication had been sent by the erstwhile Finance Secretary Subhash Chandra Garg, who was recently transferred out of the Finance Ministry to take over as Power Secretary. It has been reported that the FFC has since asked the Finance Ministry to send a fresh memorandum containing its requests. This has, however, been refuted by the FFC.
“It is routine for the Commission to ask for updated figures, so it would be wrong to say that we have asked the Centre for a fresh memorandum,” the Office of FFC Chairman N.K. Singh told The Hindu .
“The Centre is just one of the parties making their requests to the Commission out of 30, and so the Commission will find a balance between all of these. The decision of the Commission will be made independently.”
Each of the erstwhile 29 States (now 28 with the reorganisation of Jammu & Kashmir) have also made their presentations to the FFC and have made their requests.
Several of them have asked the FFC to, in fact, increase the devolution limit since the Centre has been shifting its revenues from taxes to cesses, which do not have to be shared with the States.
