Centre continues to deprive States of 41 per cent share in taxes

Hyderabad: Notwithstanding the objections being raised by the Opposition-led States including Telangana, the Centre continues to deprive them of the legitimate 41 per cent share in the Central taxes. Instead, the States’s share of the Central taxes has been restricted in the range of 29-32 per cent with an increased collection of cess and other surcharges by the Centre.

The Centre had recently released Rs 1.16 lakh crore under tax devolution to the States for the months of July and August. Sources in the Finance department said the amount accounted for only 30 per cent of the Central taxes as against 41 per cent as suggested by the 15th Finance Commission.

This had dented the State revenues severely and its share was limited to Rs 2,452.32 crore for two months (July and August). If the Centre reduced its cess and surcharges to collect more taxes, it would have enabled the State rake up another Rs 817 crore in just two months.

The share of surcharges and cess in the Central taxes was 5.97 per cent in 2014-15 during the pre-GST era which went upto 8 per cent in 2017-18 after the introduction of the GST (Goods and Services Tax). It hovered between 12-15 per cent over the next three years, before taking a huge jump to 23 per cent in 2021-22.

As a result, the States are getting a lower share in the devolution as the Centre imposed more cess and surcharges. In 2022-23, it is expected to marginally come down to around 20.28 per cent.

Since the introduction of GST regime, the States’ share in the Central taxes has been coming down from 35.07 per cent in 2017-18 to 32.5 per cent in 2021-22 and then to 29.6 per cent in 2022-23.