The recent recommendations made by state Finance Ministers at a conclave highlighted the need for a cap on cess and surcharge collection by the Centre, emphasizing the impact it has on state revenues. Karnataka Finance Minister, Gowda, suggested a five percent cap to protect state interests, while Tamil Nadu Minister, Thenarasu, urged for reduced reliance on discretionary grants and more objective resource transfers. The levy of surcharges and cess has increased over the last decade, with states like Kerala pushing for a higher share of taxes from the divisible pool.
States expressed concerns over the focus on centrally sponsored schemes, limiting their ability to implement projects tailored to local needs. Karnataka proposed estimations based on state contributions to GST or GSDP to ensure fair allocations. The need for a balance between equity and efficiency in determining state shares was stressed, with calls for a reevaluation of the current redistribution approach.
Financial experts like Arvind Subramanian and T M Thomas Isaac participated in the discussions, signaling a united effort to address the challenges faced by states in revenue allocation. The conclave shed light on critical issues impacting state finances and the necessity for a collaborative approach to ensure equitable distribution of resources.
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