Lok Sabha Question No. 1037 (UNSTARRED), answered on 2025-02-10
Subject: Dependency of States on Central Transfers and Grants
Ministry: FINANCE
Asked by: Prof. Sougata Ray, Adv. Adoor Prakash, Shri Amrinder Singh Raja Warring, Shri Saptagiri Sankar Ulaka, Shri K Sudhakaran

## GOVERNMENT OF INDIA

## MINISTRY OF FINANCE

## DEPARTMENT OF EXPENDITURE

## LOK SABHA

## UNSTARRED QUESTION NO. 1037

## TO BE ANSWERED ON MONDAY, 10 th  FEBRUARY, 2025

21 MAGHA, 1946 (SAKA)

## DEPENDENCY OF STATES ON CENTRAL TRANSFERS AND GRANTS

## 1037. SHRI AMRINDER SINGH RAJA WARRING:

PROF. SOUGATA RAY:

SHRI K SUDHAKARAN:

SHRI SAPTAGIRI SANKAR ULAKA:

## ADV. ADOOR PRAKASH:

Will the Minister of FINANCE be pleased to state:

- (a)  the  reasons  for  the  increasing  dependence  of  States  on  Central  transfers  and  Grants during the last decade;
- (b)  the  measures  being  taken  by  the  Government  to  enhance  the  capacity  of  States  to mobilise their own tax revenue, including improving efficiency in collections from stamp duty, registration fees, motor vehicle tax and other revenues;
- (c)  whether the Government has assessed the declining ratio of States tax revenue to Gross State Domestic Product (GSDP) in several States such as Tamil Nadu, Kerala and Madhya Pradesh, if so, the steps being taken to reverse this trend; and
- (d)  the steps being taken by the Government to improve Centre-State coordination on GST rates and to address the grievances raised by various States?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

- (a) The Union Government provides resources to States under Tax Devolution from divisible pool of Central taxes and duties and Grants-in-Aid including Finance Commission Grants and  grants  for  Centrally  Sponsored  Schemes  (CSS).  The  tax  devolution  to  States  has increased in the last decade primarily due to increase in the percentage of devolution from

32% in the 13 th Finance Commission period to 42% in the 14 th Finance Commission period. The 15 th Finance Commission also maintained same level of devolution after adjusting 1% for Jammu and Kashmir. Transfer to States under Centrally Sponsored Schemes have also increased from Rs. 1,96,442 crore  in 2014-15 to Rs. 4,44,547 crore in 2023-24.

(b)  to  (c) All  States  have  enacted  their  Fiscal  Responsibility  and  Budget  Management (FRBM) Act. which makes the State Government responsible to ensure prudence in fiscal management and fiscal stability by progressive elimination of revenue deficit, reduction in fiscal  deficit,  prudent  debt  management  consistent  with  fiscal  sustainability,  greater transparency in fiscal operations of the government.Compliance to the Fiscal Responsibility and Budget Management (FRBM) Act is monitored by the State Legislature. Department  of  Expenditure,  Ministry  of  Finance  generally  follows  the  fiscal  limits mandated by the accepted recommendations of the Finance Commission while exercising the powers to approve borrowings by States under Article 293 (3) of the Constitution of India.

(d) A  Group  of  Ministers  (GoM)  on  rate  rationalization  has  been  constituted  by  GST Council to simplify the GST rate structure, reduce classification related disputes, enhance GST  revenue  and  recommend  changes  to  GST  rates.  Grievances  in  respect  of  rate rationalization  including  those  from  states  would  be  examined  by  the  GoM.  Further, the grievances received from states are examined by the Law Committee (in respect of GST act, rules etc.) and by Fitment Committee (in respect of GST rates, classification etc.) Both the committees are comprised of officers both from the Centre as well as States. System related  grievances  from  states  are  examined  by  GSTN  for  resolution.  In  addition,  any specific complaints/grievances from states are examined by the GST Council Secretariat, as and when received, for expeditious resolution.

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