{"id":170664,"date":"2025-03-01T15:40:13","date_gmt":"2025-03-01T10:10:13","guid":{"rendered":"https:\/\/www.gkseries.com\/blog\/?p=170664"},"modified":"2025-03-01T15:40:14","modified_gmt":"2025-03-01T10:10:14","slug":"centres-proposal-to-reduce-states-share-of-central-taxes-from-2026","status":"publish","type":"post","link":"https:\/\/www.gkseries.com\/blog\/centres-proposal-to-reduce-states-share-of-central-taxes-from-2026\/","title":{"rendered":"Centre\u2019s Proposal to Reduce States\u2019 Share of Central Taxes from 2026"},"content":{"rendered":"\n<p>The Union government&nbsp;is&nbsp;considering a reduction in the share of central tax revenues allocated to states, from the current 41% to at least 40%. The recommendation will be submitted to the Finance Commission of India, chaired by economist Arvind Panagariya, which is set to present its report by October 31, 2025, for implementation from fiscal year 2026-27. The move, aimed at addressing the Union government\u2019s rising expenditure needs, may escalate tensions between the central and state governments. Additionally, the Centre plans to impose conditions on revenue-deficit grants to curb freebies and debt waivers by state governments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Key Highlights of the Proposal<\/h3>\n\n\n\n<p><strong>Tax Share Reduction for States<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Centre will propose reducing states\u2019<strong>\u00a0tax share from 41% to at least 40%.<\/strong><\/li>\n\n\n\n<li>The proposal is expected to be approved by the Union Cabinet by March 2025 before being sent to the Finance Commission.<\/li>\n\n\n\n<li><strong>A 1% reduction in states\u2019 share could provide the Centre with an additional \u20b9350 billion ($4.03 billion) in revenue.<\/strong><\/li>\n\n\n\n<li>The Finance Commission\u2019s recommendations are advisory and not legally binding on the government.<\/li>\n<\/ul>\n\n\n\n<p><strong>Reasons for Reducing States\u2019 Share<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The federal government\u2019s fiscal deficit for 2024-25 is estimated at 4.8% of GDP<\/strong>, while\u00a0<strong>states\u2019 fiscal deficit stands at 3.2%.<\/strong><\/li>\n\n\n\n<li>The share of states in tax devolution has increased from 20% in 1980 to 41% now.<\/li>\n\n\n\n<li>The Centre\u2019s spending requirements have increased, especially during economic slowdowns and after COVID-19.<\/li>\n\n\n\n<li>Rising cesses and surcharges (not shared with states) now account for over 15% of the Centre\u2019s tax revenue, up from 9-12% earlier.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>The Union government&nbsp;is&nbsp;considering a reduction in the share of central tax revenues allocated to states, from the current 41% to at least 40%. The recommendation will be submitted to the Finance Commission of India, chaired by economist Arvind Panagariya, which is set to present its report by October 31, 2025, for implementation from fiscal year [&hellip;]<\/p>\n","protected":false},"author":419,"featured_media":170674,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5364],"tags":[4931,82],"offerexpiration":[],"class_list":["post-170664","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs-march-2025","tag-business-current-affairs","tag-economy-current-affairs"],"_links":{"self":[{"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/posts\/170664","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/users\/419"}],"replies":[{"embeddable":true,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/comments?post=170664"}],"version-history":[{"count":1,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/posts\/170664\/revisions"}],"predecessor-version":[{"id":170675,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/posts\/170664\/revisions\/170675"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/media\/170674"}],"wp:attachment":[{"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/media?parent=170664"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/categories?post=170664"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/tags?post=170664"},{"taxonomy":"offerexpiration","embeddable":true,"href":"https:\/\/www.gkseries.com\/blog\/wp-json\/wp\/v2\/offerexpiration?post=170664"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}