Fifteenth Finance Commission to submit its report on 9th November.

The Fifteenth Finance Commission (FC) has finalised its report on fund devolution from the Centre to States three years after it was constituted. The FC has finalised the norms for five years counting from 2021-22 to 2025-26.

Highlights

  • The panel has constituted certain recommendations and it will submit the report to the President.
  • After that, report will be tabled by the Finance Minister in the Parliament stating what action has been taken on the recommendations.

Recommendations

  1. To create a separate defence and national security funds on the basis of centre’s suggestion.  However, this recommendations might mean a lower share of funds for states.
  2. It is also expected that the panel will factor in unpaid GST compensation dues to States for the year 2020. It would also work out on State’s revenue flow calculations for the years beyond 2022.

Finance Commission (FC)

The FC has been constitutionally created body that stands at the centre of fiscal federalism. It has been constituted as per Article 280 of the constitution as a quasi- judicial body. The commission is constituted by the President of India every 5 years as considered necessary by the President. The first FC was set up in 1951 and there have been fifteen FC so far. The panel make recommendations on  the distribution of net proceeds of taxes between Centre – states and among states. The primary functions of the  FC include:

  1. To evaluate finances of the Union and State Governments,
  2. To recommend on the sharing of taxes between Centre and States.
  3. To make principles for determining the distribution of taxes among States.

15th Finance Commission

The Fifteenth FC was constituted on 27 November 2017. It is being headed by the chairman NK Singh. It has been constituted in the backdrop of abolition of Planning Commission, distinction between Plan and non-Plan expenditure and introduction of the goods and services tax (GST). The NK Singh panel had first submitted report in 2019 on the government’s requested just for the year 2020-21. The 2019 report had reduced the State’s share of the divisible tax pool from 42%, to 41%. The panel had stated creation of the Union Territories of Jammu and Kashmir and Ladakh as the reason for reduction.