Finance Minister Arun Jaitley on Tuesday said that states must gradually become self-sufficient while the entire system of discretionary payments must end.
Addressing the media in the National Capital after the 14th Fianance Commission report was tabled in the Lok Sabha, Jaitley said that there is no service tax in the state of Jammu and Kashmir.
The Finance Commission has suggested raising share of states in central taxes to 42 per cent from current 32 per cent.
As per the increased devolution suggested in the report of the 14th Finance Commission, the states will get Rs 3.48 lakh crore in 2014-15 and Rs 5.26 lakh crore in 2015-16.
“The higher tax devolution will allow states greater autonomy in financing and designing of schemes as per their needs and requirements,” the report said.
Meanwhile, PM Modi has tweeted, “In my letter to CMs, wrote about the Centre accepting recommendations of 14th Finance Commission, which will strengthen our federal spirit.”
“Never before has there been a 10% increase in devolution of divisible pool of resources to the States. This is unprecedented & historic,” the PM wrote.
The Commission has recommended distribution of grants to states for strengthening duly elected gram panchayats and municipal bodies. These grants will be divided into basic grants and performance grants.
The total grant to the local bodies including panchayats and local bodies for the five-year period ending March 31, 2020 works out to Rs 2.88 lakh crore.
Modi said that though the centre will be left with “lesser funds”, it wants to “strengthen hands of States” in pursuing their development agenda as per their needs.
After assessing the revenue and expenditure of the states for the period 2015-20, the Commission has recommended a grant of Rs 1.94 crore to meet the deficit of 11 states.
The PM further wrote, “Accepting recommendations of 14th FC is another indicator of our commitment to move away from ‘One Size Fits All’ approach on States.”