12/9/2023 0 Comments Define finance commissionThe state governments’ share at 41 per cent of divisible pool comes to 42.2 trillion for the 2021-26 period. Out of that, the Divisible pool (after deducting cesses and surcharges, as well as the cost of collection) is estimated to be 103 trillion rupees. In the Commission’s assessment, gross tax revenues for 5-year period is expected to be 135.2 trillion rupees (i.e., 135.2 lakh crore). However, it has made an adjustment of about 1 per cent due to the changed status of the erstwhile State of Jammu and Kashmir into the new Union Territories of Ladakh and Jammu and Kashmir. It is at the same level of 42 per cent of the divisible pool as recommended by the Fourteenth Finance Commission. In order to maintain predictability and stability of resources, especially during the pandemic, the Fifteenth Finance Commission has recommended maintaining the vertical devolution at 41 per cent – the same as for 2020-21. Key recommendations of the Commission include: In total, the Fifteenth Finance Commission’s report has 117 core recommendations, along with numerous suggested reforms for the Union ministries and State governments, respectively. This report outlines some crucial recommendations for state governments, covering the sharing of tax revenues between the Union and State governments grants from the Centre and guidelines for borrowing that States are permitted to incur over the medium-term. In February 2021, the Fifteenth Finance Commission’s released the report covering its recommendations for intergovernmental fiscal relations for the period 2021/22 to 2025/26. As per the Constitution, a Finance Commission is constituted by the President every five years to guide the financial relations between the central government of India and the individual state governments. An important institutional feature of India’s system of intergovernmental fiscal relations is the role of Finance Commission.
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