Assam urges 16th Finance Commission for tax devolution reform

Syllad | The Rising MeghalayaSeptember 26, 2024

Assam has called for significant reforms in tax devolution, urging the 16th Finance Commission to adopt criteria that better reflect the state’s unique financial challenges.

Chief Minister Himanta Biswa Sarma raised concerns over the steady decline in Assam’s share of tax devolution since the 13th Finance Commission. He attributed this downward trend to lower taxes on petroleum products and liquor in neighbouring states, which has resulted in revenue losses for Assam.

A delegation from the 16th Finance Commission, led by its chairman is on a four-day visit to Assam.

In a post on X, Sarma wrote: “I had a good interaction with members of the 16th Finance Commission and its distinguished Chairman A Panagariya Ji. We endeavour to ensure Assam emerges a net contributor in India’s quest to become the third largest economy. To achieve this, we made insightful submissions that can help strengthen Cooperative Federalism, address vertical & horizontal challenges and strike a fine balance between Equity and Efficiency.”

“I also highlighted to the Commission the unique challenges and costs faced by Assam, such as its diverse geography, the impact of climate change, multiple international borders, and the looming threat of demographic shifts,” Sarma said.

“Despite these challenges, we have managed to achieve higher capital expenditure and demonstrated strong performance across critical sectors including health, education, drinking water, infrastructure, local governance, disaster mitigation, and power,” Sarma added.

Later addressing a press conference, Panagariya said Sarma highlighted that since the 13th Finance Commission, Assam has faced a consistent reduction in its share of tax devolution, attributing this to lower taxes on petroleum products and liquor in neighboring states.

Sarma argued that neighbouring states with lower tax rates are being compensated by the Finance Commission, causing a revenue loss for Assam. In response, the Assam government proposed that tax devolution criteria should reflect the unique conditions of each state.

Sarma suggested reducing Assam’s share from 15% (as allocated by the 15th Finance Commission) to 10%, based on the state’s current financial realities.

The 16th Finance Commission acknowledged the merit in Assam’s proposals, indicating that they were being seriously considered. The commission, which is responsible for advising on the distribution of tax revenues between the Centre and the states, arrived in Assam for a four-day visit to assess the state’s financial situation and explore potential solutions.