15th Finance Commission Report

The 15^th Finance Commission has completed all the procedures of considerations and is expected to submit the report to the president of India. The 15^th finance commission was established under the chairmanship of NK Singh for 5 years between 2021-22 and 2025-26. The finance commission is constituted to define the financial relations between the central government and state governments. The commission would submit the report to the president followed by its presentation in the Parliament of India by the finance minister along with report about the action taken. The commission was formed on the backdrop of many decisions that changed the systemic scenario such as abolition of planning commission, introduction of GST regime as well as scrapped distinction between plan and non-plan expenditure.

1^st report of Finance Commission for 2020-21

The Government of India had extended its term by 11 months and therefore the commission was asked to submit the initial first report for the year 2020-21. It marginally reduced the share for the states of the divisible tax pool from 42% recommended by 14^th Finance Commission, to 41%. The reason given was the creation of Union Territory of J&K and Ladakh after the abrogation of article 370.

Challenges ahead of 15^th Finance Commission

• States in India will closely wait on the recommendations related to the viability of creating the separate defence and national security fund because it may reduce or harm their share of funds.
• The issue of unpaid GST compensation to states this year in pandemic due to harmed cess collections used to compensate the states by centre.