Critically examine the recommendations of Twelth Finance Commission.
Answers
Answer:Summary of the recommendations of the TFC are placed at Annex-II.
State-wise estimation of share in central taxes and specific amounts of grants recommended for various purposes have been compared with the recommendations of the Eleventh Finance Commission (EFC). The comparative position is encapsuled in Annex-III.
Salient Features of TFC Recommendations
1. Total Transfers recommended
The 12th Finance Commission has recommended a total transfer of Rs.7,55,751.62 crore ( share in central taxes and duties Rs.6,13,112.02 Crore + Grants-in-aid Rs. 1,42,639.60 crore) to States during 2005-10 as against Rs.4,40,209.26 crore ( Rs. 3,76,318.01 crore as share in central taxes and duties + Rs. 58,587.39 crore as grant-in-aid + Rs.5,303.86 crore as Centre's share of Incentive Fund) by 11th Finance Commission for the five years period 2000-05, showing an increase of 71.68% over TFC award period.
2. Grant in aid of States' revenues
The Non-plan grants under Article 275 of the constitution as per 12th Finance Commission are significantly higher when compared with the corresponding grants for the period of 11th Finance Commission 2000-05
3. Share in central Taxes
The share of the States in the net proceeds of shareable central taxes would be 30.5 per cent during 2005-10 (during 2000-05 it was 29.5%). For this purpose, additional excise duties in lieu of sales tax on textiles, tobacco and sugar are treated as a part of the general pool of central taxes. If the tax rental arrangement for these three commodities is terminated and the States are allowed to levy sales tax (or VAT) on these commodities without any prescribed limit, the share of the States in the net proceeds of shareable central taxes shall be reduced to 29.5 per cent.