Six non-BJP ruled states petition President against 15th Finance Comm

Six non-BJP ruled states on Thursday petitioned President Ram Nath Kovind against the terms of the 15th Finance Commission for deciding the share of states in taxes collected by the Centre, and said that they violate the federal principle as well as infringe upon the Constitution.

In a memorandum signed by chief minister and finance ministers of Andhra Pradesh, Kerala, West Bengal, Puducherry, Punjab and Delhi, the states opposed some of the terms of reference (ToR) saying they "violate the federal principle as enshrined in the Constitution, erode autonomy of states, and bring significant financial hardship to all states".

Stating that some of the ToR are "qualitatively" different from those of previous Finance Commissions, the memorandum said changes will restrict the states from fulfilling their Constitutional obligations.

The Finance Commission, which every five years recommends a ratio in which the tax money collected by the central government is to be divided among the states, has begun work and will submit its report by October 2019.

The 15th Finance Commission, headed by N K Singh, has also been asked to propose measurable performance-based incentives for states which have made efforts to expand and deepen the tax net, slowed population growth, promoted ease of doing business and saved money by adopting Direct Benefit Transfer where government dole is paid via bank accounts of users.

Besides, it has been asked to recommend incentives for states which have been able to control or eliminate incurring expenditure on populist measures.

The key point of difference is the ToR asking the panel to take the census of 2011 as the basis for population data instead of 1971 census which was the basis of recommendations till the 13th Finance Commission, for devolution of funds.

The previous, 14th Finance Commission introduced that idea in a small way for the first time. It gave a weightage of 10 per cent for Census 2011 data and resulted in hurting states like Tamil Nadu which had seen slower growth in population as compared to states like Bihar and Madhya Pradesh.

The six non-BJP ruled states wanted the reference to be 1971 census, according to the memorandum.

They also wanted deletion of the ToR which deals with the impact on the fiscal situation of the central government in view of substantially enhanced tax devolution to states after the previous Commission's recommendations.

Besides, they said, the reference to the efforts made by the states in the expansion and deepening of tax net under the GST should be deleted.

The six-states also wanted deletion of references to Direct Benefit Transfer (DBT) as well as that to the elimination of losses of power sector and expenditure on populist measures.

It asked for the 15th Finance Commission to report on the impact of the Goods and Services Tax (GST) on the finances of the Centre and states.

The previous Commission had recommended that states should get a record 42 per cent of the tax revenues collected by the Centre. Recommendations of all the previous Finance Commissions have been accepted by the government.