Report of the Eighth Finance Commission
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REPORT OF THE EIGHTH FINANCE COMMISSION NIEPA DC HI 1 D06779 1984 P a r a / L in e / Page Annexure C ol. F or Read 21 3 .4 9 7 than then 22 3 .5 8 4 or o f 22 3 .5 8 5 coma able comparabl e 25 3 .72 2 very vary 27 3 .8 4 5 Poterntial Potential 30 3 .1 0 4 3 strea ssed stressed 31 3. 113 4 restricated restricted 35 4 .7 3 grwoth growth 48 6.11 4 wrought brought 62 9 3 2 w ere was 63 9. 5 4 It If 79 12.26 20 eue due 101 14.20 4 has have 102 14.27 11 sevings savings 145 Table I 2 (+) 1147.56 (+) 1147.55 148 F oot note@ At the rate of At the rate of 10 p er cent for 15 per cent for 1985-86,20 per 1986-87, 20 per cent and 25 per cent for 1987-88 cent for 1988-89 and 25 p er cent for 1988-89 160 6(e) 1 em olym ents em olum ents 248 XII - 9 9 3 9 .4 0 3 9.7 4 251 XII. 12 3 6 9 .8 0 96.8 0 253 X III-l(v ) 1 of at 2 _ Addenda/Deletia Page P a ra /Item Add/Insert/Delete 163 21 Delete 'represented by' 235 4(ii) Insert Atomic between Tarapu and P o w e r . REPORT OF THE EIGHTH FINANCE COMMISSION 1984 a ..... :s Ullll, National Insv i *-■ . • Educatiomtk*^ P l-im irv’ * J /* rai-i-rration 17-B.SilAur Mirg,NewPelki-lliQlIb- DOC. N o ____ CONTENTS CHAPTER PAGE I Inroduction 1-6 II Our Approach 7-8 III Reassessment pf the forecasts of State Govern ments on Revenue Account 9-34 IV Reassessment of the forecasts of the Central Government 35-39 V Income-tax 40-45 VI Union duties of Excise 46-54 VII Additional duties of Excise 55-59 VIII Estate duty in respect of property other than agricultural land 60-61 IX Grant in lieu of tax on Railway passenger fares 62-65 X Grant on account of wealth tax on agricultural property 66-67 XI Financing of relief expenditure 68-73 XII Upgradation of standards of administration 74-88 XIII Grants-in-aid 89-96 XIV Non-Plan capital gap of tne States 97-108 XV Taxes and duties mentioned in Articles 268 and 269 of the Constitution 109-121 XVI General observations 122-124 XVII Summary of recommendations 125-131 MINUTES/NOTE 1. Minute of dissent by Shn Justice T.P.S.Chawla, Member and Shri G.C. Baveja, Member on treatment to be accorded to additional resource mobilisation and committed expenditure 132-133 2. Minute of dissent by Shri Y.B.Chavan, Chairman and Shri G.C. Baveja, Member, on treatment to be accorded to repayment of Small Savings loans during 1984-89 ana observations thereon by Shn Justice T.P.S.Chawla, Dr.C.H.Hanumantha Rao and Snri A.R.Shirali,Members 134-138 3. Note of dissent by Shri A.R. Shirali, Member 138-149 APPENDICES 150-158 ANNEXURES 159-268 CHAPTER I INTRODUCTION 1.1 This Finance Commission, the eighth since the commencement of the Constitution, was consti tuted by the President by his Order dated the 20th June, 1982, which is reproduced below: "In pursuance of the provisions of article 280 of the Constitution of India and of the Finance Com mission (Miscellaneous Provisions) Act, 1951 (33 of 1951), the President is pleased to constitute a Finance Commission consisting of Shri Y.B, Chavan, Member of Parliament as the Chairman and the following four other Members namely:- 1. Shri Justice Sabyasachi Mukherjee, Judge, Calcutta High Court. 2. Dr. C .H . Hanumantha Rao, M em ber, Planning Com m ission. 3. Shri G.C. Baveja, Secretary, Ministry of Finance. 4. Shri A. R. Shirali, Deputy Com ptroller & Auditor General o f India. 2. The Chairman and other Members of the Commission shall hold office from the date on which they respectively assume office upto the 31st day of October, 1983. 3. The Chairman shall render part-time service to the Commission. Shri Justice Sabyasachi Mukherjee and Dr. C.H. Hanumantha Rao shall render part-time service as Members of the Commission. Shri G.C. Baveja shall render part-time service upto 30th June, 1982 and full-time service thereafter. Shri A. R. Shirali shall render full-time service. 4. The Commission shall make recommendations as to the following matters:- (a) The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under Chapter I of Part XII of the Constitution and allocation between the States of the respective shares of such proceeds; (b) the principles which should govern the grants-in-aid of the revenues of the States out of th« ConaoTTHatjgd HtiriHTif inHlfl mrt thfl fltima to he paid to thfe States wmcn are in need o f ass is- tance by way of pranta-in-airf of their revenues under article 275 of the Constitution for purposes other than those specified in the provisos to clause (I) of that article.' 5. In making its recommendations, the Commission shall have regard, among other considera tions, to:- i) the resources of the Central Government and the demands thereon on account of the expendi ture on civil administration, defence and border security, debt servicing and other com mitted expenditure or liabilities; ii) the existing practice in regard to determination and distribution of Central assistance for financing State Plans; iii) the revenue resources of those States for the five years ending with the financial year 1988-89 on the basis of the levels of taxation likely to be reached at the end of the financial year 1983-84 and the targets set for additional resource mobilisation for the Plan; iv) the requirements on revenue account of those States to meet the expenditure on administra tion and other non-PI an commitments or liabilities, keeping however in view national poli cies and priorities. In assessing such requirements, the Commission shall take into accounts a) such provision for emoluments and terminal benefits of Government employees, teachers and employees of local bodies as obtaining on a specified date as the Commission deems it proper and with reference to appropriate objective criteria rather than in terms of actual increases that may have been given effect to; and b) commitments in regard to interest charges on their debt, transfer of funds to local bodies and aided Institutions; 2 v) adequate maintenance and upkeep of capital assets and maintenance of Han schemes comp leted by the end of 1983-84, the norms, if any, on the basis of which specified amounts are allowed for the maintenance of different categories of capital assets and the manner in which such maintenance expenditure could be monitored, being indicated by the Commission; vi) the requirements of States for up gradation of standards in non-developmental sectors and services particularly of States which are backward In general administration with a view to bringing them to the levels obtaining or likely to obtain in the more advanced States, the manner in which such expenditure could be monitored, being also Indicated by the Commis sion; vil) the scope for better fiscal management and economy in expenditure consistent with effici ency; and vlll) the need for ensuring reasonable returns on Investments in irrigation and power projects, transport undertakings, industrial and commercial enterprises and the like. 6 . The Commission may suggest changes, if any, to be made in the principles governing the dis tribution among the States of:- a) the net proceeds in any financial year of estate duty in respect of property other than agricultural land; b) the net proceeds in any financial year of the additional excise duties leviable under the Additional Duties of Excise (Goods of Sjpeclal Importance) Act, 1957, In replacement of the sales tax levied formerly by the State Governments on each of the following commodities; namely :- i) cotton fabrics; 11) woollen fabrics; 111) rayon or artificial silk fabrics; iv) sugar; and v) tobacco including manufactured tobacco. Provided that the share accruing to each State shall not be less lhan the revenue realised from the levy of sales tax for the financial year 1956-57 in that State. c) the grant to be made available to the States in lieu of the tax under the repealed Railway Passenger Fares Tax Act, 1957; and d) the grant to be made available to the States on account of wealth tax on agricultural property. 7. hi making its recommendations on the various matters aforesaid, the Commission shall adopt the population figures of 1971 in all cases where population is regarded as a factor for determina tion of devolution of taxes and duties and grants-in-aid. 8 . The Commission may examine the scope for raising revenue from the taxes and duties mentioned in article 269 of the Constitution but not levied at present and the scope for enhancing revenue from the duties mentioned in Article 268. 9. The Commission may make an assessment of the non- Plan capital gap of the States on a uniform and comparable basis for the five years ending with 1988-89. Ea the light of such an assessment, the Commission may undertake a general review of the States' debt position with particular reference to the Central loans advanced to them and likely to be outstanding as at the end of 1983-84 and sug gest appropriate measures to deal with the non-Han capital gap, having regard Inter-alia to the overall non-Han gap of the States, their relative position and the purposes for which the loans have been utilised and the requirements of the Centre.