Skip to main content

Tax share of states should be 40%, but they get only 30%, impacting social welfare

By Bharat Dogra 
Most of the discussion on budgets in India is dominated by the discussion of union budget and hence adequate attention is not drawn to trends in state budgets. However this much is well-known that state governments have faced increasing pressure in recent years to meet the extra needs of people caused due to the adverse economic situation related to demonetization, the pandemic, prolonged lockdowns, adverse weather conditions and disaster situations, very high levels of unemployment combined with significant price-rise.
Of course the situation is not the same in all states in all these respects but by and large we can say that in most parts of India the people, particularly the weaker sections and the unorganized sector, not having employment security and social security, have been suffering the most on account of all these factors and hence there is a genuine need as well as pressure on state governments to increase various welfare expenditures to provide much needed relief to people.
In these conditions of enhanced responsibility, the difficulties of state governments have increased due to the fact in recent times states have received a significantly lesser share of central taxes compared to the legitimate expectation, based on finance commission recommendations, as well as the peak achieved earlier. According to the latest Finance Commission Report the share of states should be around 40% of gross taxes, but instead this has been around 29-30% in recent times. The union government has been resorting more and more to cesses and surcharges for raising resources, with their share in gross tax revenue almost doubling from around 10% to 20% within the last decade or so. As these cesses and surcharges are mostly not shared with states, the size of the divisible tool to be shared with states has been shrinking in relative terms. On top of it , cesses and surcharges are not always being used for the purpose for which these were raised, thereby further messing up fiscal responsibility and transparency.
In fact the need to be fair to states has increased after the GST regime of indirect taxes was established as this greatly limits the capacity of any state government to raise resources quickly, autonomously and more in keeping with their circumstances, as the power to decide indirect taxes is now more with the union government and the GST Council. Of course states are represented in the Council but their immediate ability to raise resources has certainly been affected adversely. The compensatory regime which was established for a limited period to temporarily sweeten the GST pill for state governments is also ending now and so it is all the more important for the union government to be more sensitive towards the financial needs of state governments. Unfortunately the union government has not quite lived up to this federal responsibility in recent times.
This can have adverse impacts at state level in several contexts but two of these adverse impacts may be emphasized here in particular. First and foremost, the welfare of people particularly weaker sections may be adversely affected in some crucial contexts, particularly in terms of the resources needed for the welfare initiatives which state governments want to take on their own, keeping in view also their special needs and circumstances as well as independent thinking, consultations with people regarding their needs and promises to people based on this. If states are unable to meet their share of contribution for some central programs and schemes, they may additionally lose more funds. Hence there may be a compelling need to provide this contribution. However if they prioritize this the most in a situation of resource constraints, then what they are left with for their own welfare schemes, which may be more relevant to their specific needs, may get reduced further.
Secondly, in a situation of such overall resource constraints, state governments may become more dependent on those kinds of revenue sources which may have very harmful social and ecological costs. Some states have been desperate to increase their excise earnings by promoting liquor consumption and opening more liquor vends even in more remote villages. The new controversial excise policy of the AAP government in Delhi sought to increase revenue by increasing the number of liquor vends in Delhi at one go from around 630 to about 850. Some states have been more eager to promote earnings from excessive and indiscriminate mining and quarrying with very high environmental costs.
Both these trends have been reported from several states and while narrow local and personal factors may also be involved here, one compelling factor has also been to tap to the maximum whatever quick revenue increasing sources may still be within the grasp of the state government concerned, to make up for resource shortages.
To avoid such adverse situations which are harmful for people, the union government should give much more attention to ensuring that states get their just share. The demands for a higher share of taxes to be provided to state governments and extension of GST compensation to them, which have have been frequently voiced in recent times, deserve urgent attention and sympathetic consideration from the union government.
---
The writer is Honorary Convener, Campaign to Save Earth Now. His recent books include ‘Planet in Peril’, ‘Man over Machine’ and ‘India’s Quest for Sustainable Farming and Healthy Food’

Comments

TRENDING

Crucial to revisit roots, embrace core Hindu principles: love, compassion, harmony

A note on religious leaders'  Satya Dharam Samvad in Haridwar: *** In a groundbreaking gathering, more than 25 religious leaders including Swamis, Acharyas, Pujaris, Gurus, and Sadhvis from all over India convened to discuss the tenets of Hinduism on September 16th, 2023, in Haridwar, to discuss and discern the current trajectory of Hinduism. This brand new initiative, the Satya Dharam Samvad, was inspired to organize its first assembly in response to the December 2021 Dharma Sansad, where hate speech and calls for violence against the Muslim community contravened the essential principles of Hinduism. Religion is being used to incite riots among Hindus, Muslims, Christians, Buddhists, Jains, etc. In the face of such hatred, Swami Raghavendra felt that something meaningful should be done in the present climate. 

Commodification of road accident deaths: The hidden health hazard of motonormativity

By Chandra Vikash*  Jahnavi Kandula, an Indian student from Andhra Pradesh, studying in America was killed in a road accident by a police motor car in January 2023. Now, 8 months after the accident, a bodycam video of Daniel Orderer, who is the vice president of the Seattle Police Officers Guild, has gone viral on social media. He was laughing at her death and saying that “she was 26 years old, anyway… she had limited value… just give her $11,000 (ie Rs 9.13 lakh)”.

Telengana peasant uprising 1946-51: Path breaking period in Communist movement

By Harsh Thakor  Telengana armed struggle from 1946-51 was path breaking period in the Indian Communist Movement, enabling it to reject the Russian insurrectionist path and emulate the Chinese model. The intensity of the movement escalated people’s democratic power to a scale unparalleled in Indian history. It literally dawned a new era. Revolutionary zeal climbed heights rarely traversed in semi-colonies. The death defying spirit which the comrades displayed in giving a blow to the Nizam ruler of Hyderabad and the Razakar landlords will be written forever in the red letters of history. Tragically it was crushed by the Congress party led by Nehru, who mercilessly ordered the army to swoop on the rebellion, with the Communist Party of India adopting a compromising position. It was ample proof of how Nehru and the Congress party collaborated with the feudal landlord class.

Inside Indian energy-mining giant Vedanta's campaign to weaken environmental rules

By Akshay Deshmane  It was 2021 and the COVID-19 pandemic was ripping through India, crippling the country’s health system and bringing the economy to a standstill. But for Anil Agarwal, chairman of the energy and mining giant Vedanta Resources Ltd, the crisis presented an opportunity.

Job opportunity in unexplored territory... to bulldoze hurdles on way to Akhand Aryavart

By Abdul Puncharwala*  Baba and Mama the Jai-Veeru Jodi of Shuddh desi politics bring an excellent opportunity of employment to all the bright matriculate drop-outs busy with their Insta and YouTube reels. Keep your phones aside for a moment and read this advert carefully. It is going to change your life forever.

Abrogation of Art 370: Increasing alienation, relentless repression, simmering conflict

One year after the abrogation by the Central Government of Art. 370 in Kashmir, what is the situation in the Valley. Have the promises of peace, normalcy and development been realised? What is the current status in the Valley? Here is a detailed note by the People’s Union for Civil Liberties , “Jammu & Kashmir: One Year after Abrogation of Art. 370: Increasing Alienation, Relentless Repression, Simmering Conflict”:

Regretful: Kapil Dev retired not leaving Indian cricket with integrity he upheld

By Harsh Thakor  Kapil Dev scaled heights as an entertainer and a player upholding the spirit of the game almost unparalleled in his era. In his time he was cricket’s ultimate mascot of sportsmanship On his day Kapil could dazzle in all departments to turn the tempo of game in the manner of a Tsunami breaking in. He radiated r energy, at a level rarely scaled in his era on a cricket field. Few ever blended aggression with artistry so comprehenisively. Although fast medium, he could be as daunting with the ball as the very best, with his crafty outswinger, offcutter, slower ball and ball that kicked from a good length. Inspite of bowling on docile tracks on the subcontinent, Kapil had 434 scalps, with virtually no assistance. I can never forget how he obtained pace and movement on flat pancakes, trapping the great Vivian Richards in Front or getting Geoff Boycott or Zaheer Abbas caught behind. No paceman carried the workload of his team’s bowling attack on his shoulders in his eras muc

Informal efforts to help children of remote Bundelkhand village unable to go to school

By Bharat Dogra  Rajaram Ka Purva is a remote rural hamlet in Banda district of Uttar Pradesh inhabited by the poorest of the poor. Almost none of the children in this hamlet are able to go to school. The reasons relate to poverty, distance of the nearest school as well as the unsafe path to school.

Understanding universe, time, space: A crucial, unresolved question before humanity

By Prof Sudhanshu Tripathi*  A crucial question before humanity, still unresolved, is to comprehend the true nature and expanse of Time and Space in Universe. If both are indeed limitless, there is no question then to go beyond them. Because both Time and Space are indeed the two key determinants in this mundane world which define the very expanse of the life period of all living organisms and non-living entities and their relative spatial area producing mental and extra-mental consciousness. 

2024 elections in India: An agenda for justice, peace, democracy and environment

By Bharat Dogra  As debates leading up to 2024 union elections in India preceded by some important state assembly become intense, it is not enough to talk about election alignments among various political parties and their seat adjustments; the questions relating to the most important priorities and a future agenda based on justice, equality, peace, environment protection and democracy must get the most importance.