Red Topic :14th
Finance Commission Red Regarding the increase in state's share in central taxes
from 32% to 42%, FC- XIV states; "As service tax is not levied in the
state of J&K, proceeds cannot be assigned to this state". Is this
exemption in devolution for J&K only in reference to service tax or on all
other items included in the state's share in central taxes (over the years, the
state has been receiving share of income tax, customs, union exercise duties
etc. from the centre.)
Yes. You are right.. This is an
exception only..
So
sir, there will b no devolution in case of service tax. But in case of other
items in states shares in central taxes the devolution will be 42%?
Yes, its main function is to distribute
the net proceeds of taxes to be divided as per states' contribution to the
taxes.. And grants in aid too..
Its questionable. The FC does not the
see whether a tax is collected from that tax or not. It merely prescribed a
formula for sharing between states n Union. If such logic is extended then most
of the poor states where no taxes r collected would receive any aid from the
union govt. Presently poorer States r getting more funds itself shows that tax
sources has no relevance with devolution
Also
sir, if it the exception was only applicable to service tax component of states
share (given that j&k does get share in union exercise etc.), then what was
the need to mention it separately. Cz if its on the basis of state
contribution, for 42% of 0 (fir j&k or any other state for that matter) wil
b zero.
Yet, among the grants devolved to states, j&k got the
maximum..may be compensatory for not providing portion of the proceedings to
that state.. Compensation means in lieu of more tax collected but appropriated
by the Union. So the union grants to the States is less than the share of tax
collected from their territory. Hence in lieu of the loss, the govt gives extra
in the form of Grants in Aid which is outside the devolution suggested by FC
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