FinMin sanctions Rs 92,077 cr to states as devolution of central taxes

In a tweet, the Office of Finance Minister Nirmala Sitharaman said, "GoI has released a total amount of Rs 92,077 crore, as state's share in the devolution of central taxes and duties for the months of April and May 2020."

New Delhi: The government on Thursday said it has released Rs 92,077 crore towards devolution of central taxes to states for April and May.

In a tweet, the Office of Finance Minister Nirmala Sitharaman said, "GoI has released a total amount of Rs 92,077 crore, as state's share in the devolution of central taxes and duties for the months of April and May 2020."

• … and has not been adjusted for the actual tax collections, impacting Centre’s cash balances. This is a special gesture to ensure that States' cash flows remain undisturbed at this crucial time. (2/2) @PIB_India @MIB_India @FinMinIndia

  — NSitharamanOffice (@nsitharamanoffc) May 21, 2020 " class="align-text-top noRightClick twitterSection" data="

  … and has not been adjusted for the actual tax collections, impacting Centre’s cash balances. This is a special gesture to ensure that States' cash flows remain undisturbed at this crucial time. (2/2) @PIB_India @MIB_India @FinMinIndia

  — NSitharamanOffice (@nsitharamanoffc) May 21, 2020

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  … and has not been adjusted for the actual tax collections, impacting Centre’s cash balances. This is a special gesture to ensure that States' cash flows remain undisturbed at this crucial time. (2/2) @PIB_India @MIB_India @FinMinIndia

  — NSitharamanOffice (@nsitharamanoffc) May 21, 2020

The devolution amount for April stood at Rs 46,038.10 crore, while for May, it is Rs 46,038.70 crore.

The tweet further said that these releases are according to projections of receipts in Budget Estimate 2020-21 and have not been adjusted for the actual tax collections, impacting the Centre's cash balances.

"This is a special gesture to ensure that the states' cash flows remain undisturbed at this crucial time," it added.

The Budget had projected the share of the states in taxes at Rs 7.84 lakh crore for 2020-21.

The 15th Finance Commission had recommended the share of states at 41 per cent of the divisible pool and 1 per cent for the newly-created Union Territories of Jammu and Kashmir, and Ladakh.

The 14th Finance Commission had recommended that the states be given 42 per cent share in taxes.

No restrictions on utilisation of additional borrowing by states: FinMin official

The Centre has not imposed any restrictions on states for utilisation of additional borrowing of 2 per cent and they are free to spend as per their requirements, a senior Finance Ministry official has said.

It is to be noted that the basic limit of 3 per cent remains unconditional, while only additional one per cent out of the two is linked to citizen centric reforms, the official said.

Finance Minister Nirmala Sitharaman while announcing this on Sunday had said that an increase in borrowing limits will be subject to states taking citizen centric reforms, which are aimed at improving quality of service delivery to the public.

In order to help states to enhance their resource base in times of the COVID-19 crisis, the central government allowed them to go in for additional borrowing of 2 per cent, over and above the regular limit of 3 per cent of the GSDP, subject to certain conditions.

"the basic limit of 3 per cent remains unconditional. Out of the additional borrowing of 2 per cent of GSDP, 0.50 per cent is untied and 1 per cent is subject to undertaking certain reforms by the state governments (0.25 per cent for each reform). Further, additional 0.50 per cent is allowed on undertaking at least any 3 suggested reforms," the official said.

It may be noted that, while the eligibility for part of the additional borrowing is conditional, its utilisation is fully untied. The reforms suggested by the central government are citizen centric and aims at increasing the quality of service delivery to the public, the official added.

These reforms are -- implementation of one nation one ration card system; district level and licensing reforms for ease of doing business; strengthening local bodies; and power sector reforms.

The additional borrowing will provide states extra resources of Rs 4.28 lakh crore to deal with COVID-19 crisis.

States' net borrowing ceiling for 2020-21 is Rs 6.41 lakh crore (3 per cent of gross state domestic product).

(PTI Report)