NEW DELHI: States in their pre-budget meet on Friday raised the long-standing issue of cesses and surcharges with finance minister Nirmala Sitharaman. According to them, the share of central surcharges of cesses have increased from nearly 10% to 20% of the gross tax revenue over the last decade, which in consequence has reduced the share of states from the divisible pool as a percentage of the Union government’s GTR. As per Kerala finance minister KN Balagopal,
“Currently, share of divisible pool is less than 30% of GTR when 15th Finance Commission has recommended 41% of the net proceeds be distributed to the states.” Meanwhile, Tamil Nadu finance minister P Thiaga Rajan said with the increase in divisible pool of Centre’s share in taxes, states’ share in centrally sponsored schemes should be revisited so that the financial burden on states’ exchequer could be decreased. Kerala Minister, among others, echoed the same observation.
They demanded flexibility in terms of implementing these schemes. In addition, Chhattisgarh Chief Minister Bhupesh Baghel demanded releasing of funds to execute the old pension scheme for state government employees. He also asked for enhancing royalty for minerals extracted in the state and the fixing different royalties on different grades of coal and iron ore.
He also made the case for continuing the GST compensation grant for the next five years after June 2022. He also suggested “the borrowing limit of the states is fixed at 4% at least for the next two financial years of 15th Finance Commission Awar period for the next twoyears 2023-24 and 2024-25. He said liking part of additional borrowing limit with capital expenditure can be considered. Also, states demanded increase in allocation of capital assistance to them depending upon the size and population of states.
‘Central cesses gone up, states’ share came down’
States say share of central surcharges of cesses have gone up from nearly 10% to 20% of the gross tax revenue over the last decade, which in consequence has reduced the share of states from the divisible pool as a percentage of the Union government’s GTR