15th Fin Commission rejects central tax pool demand by Delhi, Puducherry

The Commission will not consider their memorandums

The Fifteenth Finance Commission is not considering the demands of Delhi and Puducherry to give them a share of the divisible central tax pool in line with other states, Chairman N K Singh told Business Standard. 

“We are not formally considering the memorandum of Puducherry and Delhi because under the Constitution, we are not enjoined to do so, and we have to strictly act in accordance with the Constitution,” Singh had said in an interaction earlier this month. 

Delhi and Puducherry are formally Union Territories with legislatures and elected parties in power. They have never been considered by any of the finance commissions when it comes to determining share in central taxes.  It is assumed that all UTs are a responsibility of the Centre, and that their funds will come from the Centre’s share of the divisible pool. 

“We cannot consider demands of states that are outside the purview of our terms of reference. This is not something which is our preference, it is something on which the Commission has little flexibility because we can only go by what the Terms of Reference say,” Singh said. 

“All of this follows after the year 2000, when a Constitutional Amendment was made, under which the Union Territories were left out. There are UTs with legislatures, some without legislatures. There are some UTs that don’t have full statehood yet,” he explained. 

In 2018, it was reported by sections of media that the Centre had decided to treat Puducherry “at par with states” for the purpose of devolution of funds. This came about after governments in seven states and Union Territories had jointly written to President of India Ram Nath Kovind seeking amendments to some of the contentious terms of reference. 

A memorandum, signed by chief ministers or finance ministers of Andhra Pradesh, Puducherry, Karnataka, Delhi, Bengal, Kerala, and Punjab, said the terms were disruptive and causes of concern. The primary issue was that of use of the 2011 Census, but they also asked that Delhi and Puducherry be considered for devolution. 

It was suggested that a “suitable amendment be made in the terms of reference to ensure that the award of Fifteenth Finance Commission must apply to UTs with legislature also.” 

However, according to Singh’s statement, that will not happen. As reported in Business Standard earlier, Singh said in the aforementioned interaction that the Commission’s report will have tailor-made fiscal road map for states, depending on their current fiscal situation, and that buoyancy and stability of goods and services tax was still a concern, and that the Commission is looking to meet the GST Council soon.