The government will be able to meet the fiscal
consolidation target set by the 13th Finance Commission
in the five years between 2010 and 2015, chairman of the
commission Vijay Kelkar said after submitting its report
to President Pratibha Patil on Wednesday.
The report, it is believed, suggested higher share of
states and union territories in the central taxes. The
12th Finance Commission had suggested 30.5% share of the
states and union territories in the central taxes. The
new report, a senior government official said, has
increased their shares.
Currently, states and the UTs get Rs 1.64 lakh crore in
a year. The total tax revenue of government, which
includes shareable and non-shareable taxes, has been
estimated at Rs 6,41,079 crore during 2009-10. The
shareable central taxes include corporation tax, income
tax, wealth tax, customs, excise duty and service tax.
The taxes, which are not shared with states include some
cesses like education and road.
In its report, the 13th Finance Commission has laid down
the fiscal consolidation roadmap for the next five
years. It includes accounting for liabilities of the
central government such as oil, food and fertiliser
bonds into the fiscal accounting and the impact of
various other obligations of the government on the
deficit targets.
In the past, to meet the Fiscal Responsibility and
Budget Management (FRBM) targets, the government had got
into the practice of issuing oil and fertiliser bonds,
and these off-budget expenditure were generally not
accounted for, while estimating the fiscal deficit.
During 2008-09, the off-budget expenses, mainly on
account of oil bonds, had been estimated at 0.8% of GDP.
Kelkar said he was optimistic that government would be
able to meet the fiscal consolidation targets even if it
continues with the stimulus packages in the short-term.
"Fiscal targets laid down in the report are very much
achievable," he said.
The 13th Finance Commission deals with the devolution of
central taxes for the next five years, starting April 1,
2010. It assumes importance since reforms in the direct
and indirect taxes areas are likely to be in place in
the next couple of years. Both the Goods and Services
Tax (GST) and Direct Taxes Code are likely to be
implemented during this period.
GST was initially scheduled to be implemented from April
1, 2010 but now both the empowered group of state
finance ministers and the Centre have said that it is
likely to be delayed by at least six months as the two
sides have not yet completed framing of the legislation
and reached a consensus on the unified rate. The
commission's report will be presented in Lok Sabha in
the Budget Session in February and its recommendations
will reflect in 2010-11, Budget, FM Pranab Mukherjee
said.
The report also looked at the implications of
environment and climate change, ways to improve outcomes
and outputs of public expenditure, and impact of GST on
trade, Kelkar said.
"We have recommended a share, which will be the share
between the Centre and the states of the centrally
collected taxes," Kelkar said. The implementation of GST
will not affect the revenue of states as it is tax
neutral. "Our assumption is revenue neutral.
Fortunately, in GST, both the Centre and the states
wanted a revenue neutral rate. There won't be any impact
as rates would be neutral, and the revenues of states
and centre would be protected."
