December 2, 2021

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Centre Releases Two Tax Devolution Instalments To States


Centre Releases Two Tax Devolution Instalments To States Worth Rs 95,082 Crore

Government has released two tax devolution instalments for states

Government has released two instalments of tax devolution to states totalling Rs 95,082 crore, as a step towards boosting investment in the infrastructure sector.

The two instalments were released against the normal monthly devolution of Rs 47,541 crore which is given to states by the union finance ministry.

The instalments were released on Monday (November 22) as was decided in a meeting held between finance minister Nirmala Sitharaman and states’ chief ministers and finance ministers on November 15.

Out of all the 28 states, Uttar Pradesh received the highest devolution amount (Rs 17,056 crore), followed by Bihar (Rs 9,563 crore), Madhya Pradesh (Rs 7,463 crore), West Bengal (Rs 7,152 crore) and Rajasthan (Rs 5,729 crore).

In order to spur states to focus on infrastructure spending and help them meet their capital expenditure (capex) targets for the current financial year, the government had said during the November 15 meeting that additional devolution funds due to them totalling Rs 95,082 crores will be released on November 22.

Briefing the media after a marathon meeting with chief ministers of 15 states and finance ministers of other states, finance minister Nirmala Sitharaman had said that the decision to release the funds was taken after receiving requests from states for “front loading” of tax devolution funds, as it was an exceptional year.

She had told reporters that several states were of the view that this would help them in spending more on infrastructure development as there will be no shortage of funds.

“Therefore I have directed the finance secretary to release an additional instalment of tax devolution on November 22 to the states. There will be two installments of Rs 47,541 crore each which will be released to all states on that day. Therefore the total amount will be Rs 95,082 crore,” the finance minister had said.

The finance minister added that there was a consensus among states that infrastructure spending was important and for that they need funds, therefore it was decided to release additional instalments of tax devolution.

As per the recommendations of the 15th Finance Commission, 41 percent of the divisible tax pool is to be devolved to states.

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