The 15th Finance Commission on Saturday, in an interim report, suggested reducing the states’ share in gross tax revenue from 42% to 41%, with the 1% going to the Union Territory of Jammu and Kashmir, Business Standard reported. It recommended that Rs 90,000 crore be set aside for local bodies. However, the panel said that state-specific grants will be discussed only in its final report.
The panel also said gross tax revenues for 2019-’20 will be Rs 22.4 lakh crore, against the 2019 budget estimate of Rs 24.6 lakh crore, a shortfall of Rs 2.2 lakh crore. A revised estimate of the revenues will be provided following Finance Minister Nirmala Sitharaman’s Budget speech.
The government had in November last year extended the term of the 15th Finance Commission by one year, and asked it to prepare an interim report for 2020-’21, and a full report for the 2021-’22 to 2025-’26 financial years.
On Saturday, the commission said that “there is anecdotal, analytical, and other evidence to suggest” that the fiscal deficit will not meet its target of 3.3% for 2019-’20. Under the Fiscal Responsibility and Budget Management Act, 2003, the panel allowed for a slippage in the deficit of 0.5% of the Gross Domestic Product. However, it added that there should be a “clear commitment” to the original target set for 2020-’21.
Subsequently, during her Budget speech, Sitharaman set the fiscal deficit target for 2020-’21 at 3.8% of GDP. The finance minister also broadly accepted the report of the finance commission. A final report of the panel will be published later in the year.