As reported by TOI on October 30, the commission, which is due to submit its recommendations to President Ram Nath Kovind on Monday, is unlikely to propose a significant reduction in the tax-sharing formula. While states have been demanding the share in central tax kitty be enhanced from 42% to 50%, sources told TOI that apart from the Finance Commission transfers, there are other transfers too. For instance, the Centre provides around Rs 3.5 lakh crore for centrally sponsored schemes.
Similarly, the panel headed by bureaucrat-turned-lawmaker N K Singh, is also looking at revenue deficit grants, which add up to a large amount. The period of its award will be for April 2021 to March 2026 and the government will make the report public at the time of Budget presentation in February.
A key issue being watched is how the commission tackles defence fund, a task which was given to it later. While states are opposed to a cut from what they believe is their share of transfers through either a cess or a surcharge on taxes, the panel also needs to balance the requirement of aligning the acquisition cycle with the budget cycle, prompting it to go for a non-lapsable fund.
While defence acquisitions typically take more than a year, availability of funds for the forces is also seen to be crucial.