NEW DELHI: In the backdrop of reorganisation of the erstwhile state of Jammu and Kashmir into two Union Territories and the recent status of state finances, the 15th Finance Commission is reworking the terms of reference for allocating funds and has sought revised tax estimates before giving its interim report.
The Commission is likely to submit its interim report on Saturday, and it will suggest a formula for tax devolution for the 2020-21 fiscal year. The validity of previous formulae ends on March 31, 2020. "The state finances are delicate right now. Also, Kashmir is becoming a tricky issue.
The recent changes in the context of Kashmir and the merger of Daman and Diu and Dadra and Nagar Haveli will require some rejig. So, as of now, there is uncertainty regarding how to treat any devolution of resources. Also, the calculation was done for the target of tax given by the Centre, which needs to be relooked at. The Commission has sought revised estimate of revenue targets," a senior member of the Fifteenth Finance Commission said.
In its memorandum to the Commission earlier this year, the finance ministry had projected revenue of `175 lakh crore from 2020-21 to 2024-25, which the Finance Commission feels needs to be relooked at.
Meanwhile, the Union Cabinet on Wednesday gave one year of extension to the Fifteenth Finance Commission to work out the allotment of funds to the newly formed Union Territories.
The member added that generally Union Territories don’t get a share of the tax pool, but the Jammu and Kashmir Reorganisation Act mandates the Commission to consider the Union Territory of Jammu and Kashmir to be paid out of the divisible pool and to treat it like a state.