Amidst growing tension between the Union government and several states over the distribution of central funds, NK Singh, Chairman of the 15th Finance Commission, asserts that the spirit of the 41 per cent formula for sharing tax revenues from the divisible pool has been upheld by the Centre.
Singh, who headed the panel responsible for determining the tax revenue sharing formula between the Centre and states for the 2020-2026 period, clarified that the divisible pool excludes cess and surcharges, which are beyond the Commission's purview.
It's important to note that the dispute raised by states like Karnataka and Tamil Nadu, revolves around accusations of unfair treatment in tax devolutions and grants-in-aid over recent years.
Responding to these claims, Union Finance Minister Nirmala Sitharaman had dismissed them as "wrong and mischievous" on 7 February..
In an exclusive interview with Moneycontrol on 8 February, NK Singh said, "The criteria and the norms have not undergone any significant change in 70-75 years. Another criterion is the income distance method, and if we used that method more rigorously, then some of the more developed states could have suffered given their high per capita income."
Addressing concerns raised by states regarding diminishing shares in tax devolution due to the Centre's reliance on cess and surcharges, Singh emphasized the central government's heightened spending obligations amid evolving geopolitical and security challenges.
Singh assured that the Finance Commission has engaged extensively with all states, including those in the South, both before and after submitting interim reports.
Nayan Dwivedi is Staff Writer at Swarajya.
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