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15th Finance Commission Submits Report to Prime Minister on the Tax Rate to be Divided Between the Center and States over the Next Five Years

By Atharwa Gauraha      Nov 19, 2020      0 Comments
15th Finance Commission Submits Report to Prime Minister on the Tax Rate to be Divided Between the Center and States over the Next Five Years

On Monday, the 15th Finance Commission presented its report to Prime Minister Narendra Modi on the tax rate to be divided between the Center and the States over the next five years. 

The report entitled 'Finance Commission in the COVID Times' was sent to Finance Minister Nirmala Sitharaman on Tuesday (November 17, 2020).

An official statement said, "Today, the Chairman and Members of the 15th Finance Commission submitted to Prime Minister Narendra Modi a copy of the Commission's report for the term 2021-22 to 2025-26."

On November9, 2020,the Commission submitted its report to President Ram Nath Kovind. 

The 15th Chairperson of the Finance Commission, N K Singh, along with members of the Commission, Ajay Narayan Jha, Anoop Singh, Ashok Lahiri, and Ramesh Chand, were present on the occasion. 

"The report will be sent to the House of Commons along with the Explanatory Memorandum by means of the ATR (Action Taken Report) as stipulated in the Constitution," the statement continued.

The Finance Commission is a legislative body that makes recommendations on central-state financial ties. 

Two reports were submitted by the 15th Finance Commission-the first report consisted of recommendations for the 2020-21 financial year and the second report containing recommendations for the 2021-26 financial year.

While the previous 14th Finance Commission recommended that 42% of all taxes be paid to the States, the 15th Finance Commission recommended a complete devolution of Rs 8.55.176 to the States for 2020-21, which is 41% of the divisible pool of taxes. 

The recommendations of the 15th Finance Commission for the term 2021-22 to 2025-26 have not been made public, as they have not been tabled in Parliament.

The 14th Finance Commission raised the share of the Member States by 10 percentage points to 42 percent, and it remains to be seen what its successor will do, given that the Center is under pressure for funding at a time when it is looking to improve the economy through spending. The Commission was asked to make recommendations on a wide range of topics.

Apart from vertical and horizontal tax devolution, local government grants, disaster management grants, it was also asked to analyze and suggest performance incentives for states in many areas such as the power sector, direct benefit transfer, solid waste management, etc. 

The Commission was also asked to investigate whether a separate mechanism for the financing of defense and internal security could be developed and if so, how such a mechanism could be operationalized.

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