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14th Finance Commission: Share of States in the Union Tax Revenue

17-APR-2018 18:30
    14th Finance Commission

    As we know that most of the taxes in India are imposed and collected by the Union government and states government are left with very limited sources of the income to run their administration. That is the reason that article 280 of the Indian Constitution requires the composition of the Finance Commission in every five years so that the states can get a reasonable part in the tax revenue of the union government.  The 14th Finance Commission of India is constituted in the chairmanship of the former RBI governor Mr. Y.V. Reddy for the period of April 1, 2015 to March 31, 2020.

    The 14th Finance Commission has recommended a record 10% increase in the states' share in the Union taxes to 42% as compared to the 13th Finance Commission. The total devolution to states during the five year (2015-20) period will be Rs 39.48 lakh crore.

    Criteria and weights for the horizontal distribution of the tax is as follows;

     Criteria

     Weight (%)

     1. Income Distance

     50

     2. Population (1971)

     17.5

     3. Area

     15

     4. Demographic Change (2011)

     10

     5. Forest Cover

     7.5

     The share of the States in the Union Tax Revenue is as follows;

                    State

     Share of States in the Union Tax Revenue (%)

     1.  Andhra Pradesh

     4.035

     2.  Arunachal Pradesh

     1.37

     3.  Assam

     3.111

     4.  Bihar

     9.665

     5.  Chhattisgarh

     3.08

     6.  Goa

     0.378

     7.  Gujarat

     3.084

     8.  Haryana

     1.084

     9.  Himachal Pradesh

     0.713

     10. Jammu & Kashmir

     1.854

     11. Jharkhand

     3.139

     12. Karnataka

     4.713

     13. Kerala

     2.5

     14. Madhya Pradesh

     7.548

     15. Maharashtra

     5.521

     16. Manipur

     0.617

     17. Meghalaya

     0.642

     18. Mizoram

     0.46

     19. Nagaland

     0.498

     20. Odisha

     4.642

     21. Punjab

     1.577

     22. Rajasthan

     5.495

     23. Sikkim

     0.367

     24. Tamil Nadu

     4.023

     25. Telangana

     2.437

     26. Tripura

     0.642

     27. Uttar Pradesh

     17.959

     28. Uttarakhand

     1.052

     29. West Bengal

     7.324

     All states

     100

    In the recommendations of the 14th Finance Commission, the share of the 9 states has decreased as compared to the recommendations of the 13th Finance Commission. These states are Andhra Pradesh (including Telangana), Assam, Bihar, Himachal Pradesh, Odisha, Rajasthan, Tamil Nadu, Uttar Pradesh and Uttarakhand.

    The above table is depicting that Uttar Pradesh (17.959%) has the biggest share in the taxes of union government followed by the Bihar (9.665%) and Madhya Pradesh (7.548%).

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    DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.

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