States to lobby for bigger share of central revenues

With an eye on garnering more resources, state finance ministers will lobby the 13th Finance Commission for a higher share of central revenues and greater autonomy in tax matters.

The Empowered Committee of State Finance Ministers, an inter-state body on financial matters, is scheduled to meet the commission on September 16. An important item on its agenda is availability of more resources for development.

A key mandate of the commission is to assess future tax and non-tax receipts of the central government and fix the share of the Centre and the states. Based on the 12th Finance Commission’s recommendations, the states get 30.5 per cent of the Centre’s net tax revenue.

The commission is expected to fix the share of the states for five years, starting April 2010, after making an assessment of central tax revenues in 2008-09. Its deadline for this is October 31, 2009.

The commission, headed by former finance secretary Vijay Kelkar, is also looking at the impact of the proposed goods and services tax which will come into effect from April 1, 2010.

“The states will seek more autonomy on taxation matters. We have been asking for a constitutional amendment to give the states power to tax certain services,” said a senior state government official.

Another key demand of the states, one that is fraught with many implications, is the right to tax certain imports that directly affect their economies. At present, only the central government has the power to tax services and imports, both of which account for a major part if its indirect-tax collections.

The states will also raise the issue of resource-sharing. In the past, they have been wary of various cess and surcharges on income as the revenue realised through these levies is not shared with them.

“The collective view is that there is a need for fiscal autonomy. This should be kept in mind by the commission while giving its recommendations,” said a senior state government official.