The central government has released Rs 46,038 crore to states as their share in central taxes and duties for April.
The devolution of taxes has been done based on recommendations of Fifteenth Finance Commission, the Ministry of Finance said in a tweet. “To assist states effectively address situation arising out of Covid-19 pandemic, as a special dispensation, the calculation of net proceeds of shareable taxes has been kept unchanged as per Budget 2020-21.”
States' finances are stressed due to spending to control the spread of new coronavirus and provide relief to the poor. Some of them have been seeking help from the central government, besides transfer of goods and services tax dues. The Reserve Bank of India, too, has increased the limit for Ways and Means Advances for state governments by 60 percent.
The Fifteenth Finance Commission suggested retaining the devolution of central taxes to states at 42 percent. But due to reorganisation of Jammu and Kashmir into two union territories, the commission recommended that 1 percent of the divisible pool should be given to J&K and Ladakh, while other states would get 41 percent of the central taxes.
The budget projects distribution of net proceeds of central taxes at Rs 7.84 lakh crore, which is 41 percent of centre's tax collections. The government has projected gross tax revenue of Rs 24.23 lakh crore in Union Budget 2020-21. But the collections this year will suffer as the Covid-19 pandemic has brought economic activity to a halt.
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