Centre releases Rs 46K cr from tax pool early to assist states

New Delhi: In an attempt to assist states effectively address situation arising out of Covid-19, the Centre on Monday released the April installment of states’ share in central taxes amounting to over Rs 46,000 crore.

The money has been released ahead of schedule and as a special dispensation to meet immediate funding needs of the state governments looking to restore economic activity and minimise losses to its citizens due to disruptions caused by lockdowns.

“Ministry of Finance has issued sanctions for April installment of Devolution of States’ Share in Central Taxes and Duties amounting to Rs 46,038.10 cr today.,” the Finance Ministry said in a tweet.

“The inter-state share is as per the recommendations of the XV Finance Commission,” it added.

While releasing funds to the states, the calculation of net proceeds of shareable taxes has been kept unchanged as per Budget 2020-21, said a Finance Ministry statement,

As per a government statement, the highest share of central taxes for April has gone to Uttar Pradesh with a net transfer of Rs 8,255.19 crore. This is followed by Bihar at Rs 4,631.96 crore. West Bengal has got Rs 3,461.65 crore while Madhaya Pradesh has got Rs 3,630.60.

Maharashtra share has been lower at Rs 2,824.47 crore. Goa and Sikkim have got the least from central pool of taxes at Rs 177.72 crore and Rs 178.64 crore respectively.

In its interim report for FY21, the 15th Finance Commission has reduced the share of states in the divisible pool of central taxes by one percentage point to 41 per cent, factoring in the conversion of the erstwhile state of Jammu and Kashmir into two Union territories.

The report, tabled in Parliament in February, has also changed the criteria and weights under which funds are allocated to states.

It assigned 15 per cent weight to the population of a state, down from the 17.5 per cent allocated by the 14th Finance Commission, but raised the weight under demographic performance from 10 per cent to 12.5 per cent.

The FFC report has also introduced “tax effect”, for states, with 2.5 per cent weightage, while significantly reducing the weight for income distance from 50 per cent to 45 per cent.

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