Maharashtra govt seeks increase in states’ share in central taxes to 50 per cent

Mumbai: The Maharashtra government on Thursday sought an increase in the states' share in India’s divisible tax pool from 41 per cent to 50 per cent.

A memorandum of the western state’s demands was submitted before the 16th Finance Commission during a meeting with the Maharashtra government here, said a statement from the Chief Minister’s Office.

CM Devendra Fadnavis and his deputies Ajit Pawar and Eknath Shinde were among those who attended the meeting.

According to the statement, Maharashtra has proposed that the states’ share in the net proceeds of central taxes be raised to 50 per cent.

“The state has proposed to increase the Vertical Devolution of the divisible pool from 41 per cent to 50 per cent, to merge the cesses and surcharges with the principal taxes and to include the non-tax revenue of the Union government in the divisible pool,” it said.

The state requested the Commission to recommend new criteria like ‘Sustainable Development and Green Energy’ and ‘Incremental Contribution by States to India’s GDP’ for Horizontal Devolution, the statement said.

Horizontal tax devolution refers to the distribution of tax revenues and grants-in-aid among the different state governments within a country.

The state has requested a reduction in the weightage to the Income Distance criteria from 45 per cent to 37.5 per cent, said the statement. Income Distance measures the difference between a state’s per capita income and the highest per capita income among all states.

“In Special Grants, the State had demanded Rs 1,28,231 crore for mega projects like Implementation of Economic Master Plan for MMR, River linking Projects and assistance for works such as new High Court Complex, Prison infrastructure, PG Hostels for Medical Students and Eco-tourism,” said the statement.

The state has also proposed to the Commission to enhance the overall allocation under the State Disaster Response Fund (SDRF) and to modify the sharing ratio between the Centre and State from 75:25 to 90:10.

Another submission was to increase the grant-in-aid for local bodies from 4.23 per cent to 5 per cent of the divisible pool.

Maharashtra has proposed that grants be given to urban local bodies to boost the public bus transport and fire service systems.

The chairman of the Commission appreciated the fiscal prudence of Maharashtra and the substantial role of the state in India’s growth story, the statement added.