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Tax Devolution
Context
The Centre decided to release an additional installment of the tax devolution share of States along with their due share for June 2024. Effectively, Rs 1,39,750 crore is being transferred to States this month.
What is Divisible Pool of Taxes?
- The divisible pool of taxes refers to the portion of tax revenue collected by the Union government that is shared between the Centre and the States.
- It encompasses various taxes such as corporation tax, personal income tax, Central GST, and the Centre's share of the Integrated Goods and Services Tax (IGST).
- Notably, cess and surcharge imposed by the Centre are excluded from this pool.
Role of the Finance Commission
- Under Article 280 of the Constitution, the division of the divisible pool of taxes is determined by the Finance Commission, which is constituted every five years.
- Apart from distributing tax revenue, the Finance Commission also recommends grants-in-aid to States.
- Composition of the Finance Commission: The Finance Commission comprises a chairman and four other members appointed by the President. The qualifications for these members are specified in the Finance Commission (Miscellaneous Provisions) Act, 1951.
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