Blitz Bureau
NEW DELHI: Union Commerce Minister Piyush Goyal has come out strongly against the demand of some states seeking allocation of Central funds in proportion to the taxes that they contribute to the Central pool.
Criticising this approach as “petty thinking and unfortunate,” Goyal highlighted Prime Minister Narendra Modi’s view that if the country has to prosper, the eight states of the northeast and eastern Indian states of Bihar, West Bengal, Odisha and Jharkhand must develop as well.
“There are some states like Karnataka, Tamil Nadu and Telangana which say they should get back the amount of taxes they have paid. There can’t be more petty thinking than this. There cannot also be anything more unfortunate than this,” Goyal lamented.
He was speaking at the ‘Rashtriya Ekatmata Yatra 2025’, an event here organised by the Akhil Bharatiya Vidyarthi Parishad and the Students Experience in InterState Living initiative. The Centre distributes funds to the states in accordance with the recommendations of the Finance Commission on the share of states in the total net proceeds of all taxes, including corporation tax, personal income tax, and central GST.
The 15th Finance Commission (FC) recommended that 41 per cent of the Central Government’s divisible tax pool be allocated to states for the period 2021-26. This is known as vertical devolution. The 15th FC also recommended criteria for distributing the funds among states, known as horizontal devolution. These criteria included ‘income distance’, which reflects the difference of a state’s income from the state with the highest per capita income, the size of the population of the state as per the 2011 Census and the share of dense forest in each state.
The Union Government released tax devolution of Rs 1,73,030 crore to state governments on January 10 this year, up from the devolution of Rs 89,086 crore in December 2024. A higher amount was devolved to enable the states to accelerate capital spending and finance their development and welfare-related expenditures.
