NEW DELHI: The 14th Finance Commission, in its report tabled in Parliament on Tuesday, suggested raising the share of states in central taxes to 42 per cent from the current 32 per cent.
According to the report as per the increased devolution as suggested in the report, the states will get Rs 3.48 lakh crore in 2014-15 and Rs 5.26 lakh crore in 2015-16.
“The higher tax devolution will allow states greater autonomy in financing and designing schemes as per their needs and requirements,” the report said.
“The consequence of this much greater devolution to states is that the fiscal space for the centre will reduce in the same proportion,” the report said, adding that the dominant view was that the majority of resources should flow in the form of tax devolution.
In the report, Abhijit Sen, a part-time member of the Commission that is headed by Y V Reddy, gave a dissenting note. However, the government accepted the majority decision on tax devolution to the states. Sen, in his note, favoured devolution of 38 per cent of the divisible pool in the first year.
The Commission has recommended a grant of Rs 1.94 crore to meet the deficit of 11 states after assessing the revenue and expenditure of the states for the period 2015-20.
An overwhelming majority of states have suggested reducing the number of centrally sponsored schemes as well as outlays on them, the Finance Commission report said.
The report held that with implementation of the Commission’s report the states will see a quantum jump in transfers, this is the largest ever change in the percentage of devolution. The earlier commissions have recommended only small hikes in allocations for states.
“Compared to the devolutions in 2014-15, the total devolutions of the states in 2015-16 will increase by over 45 pc,” the report suggested. The Commission has recommended distribution of grants to states for strengthening gram panchayats and municipal bodies.