16th Finance Commission expected to be set up by end of November, says Finance Secy Somanathan

economictimes.indiatimes.com:

Finance Commission, that gives suggestions on Centre-state financial relations, may be constituted by November end this year, PTI reported on Saturday citing Finance Secretary T V Somanathan. As part of its many functions, the commission suggests the ratio in which tax is to be divided between the Centre and states for five years, beginning April 1, 2026. «The Finance Commission is expected to be constituted by end of November because that's the statutory requirement,» he told PTI in an interview.

In its advanced stages, Somanathan said that Terms of Reference (ToR) for the commission is being finalised. The previous Finance Commission submitted its report on November 9, 2020, for the 5 fiscals — 2021-22 to 2025-26 — to the President. Under N K Singh, the 15th Commission had kept the tax devolution ratio at 42 per cent, same as suggested by the 14th Commission.

The report of the commission was accepted by the centre, and accordingly, the states are being given 42 per cent of the divisible tax pool of the Centre during the period 2021-22 to 2025-26. Inclusion of the fiscal deficit, debt path for the Union and states, and additional borrowing room to states based on performance in power sector reforms were a few recommendations made by the 15th finance commission. As per the glide path for fiscal consolidation, the government aims to bring down the fiscal deficit to 4.5 per cent of gross domestic product (GDP) by the 2025-26 fiscal.