Chapter 12: FOURTEENTH FINANCE COMMISSION
Chairman is YV Reddy and four
delivered on Dec 2014 and implementation of it shall be
done from 2015-2020.
to states and between center and states
of Panchayati raj institutions.
as decided by the president
devolution between center and states should be 42%.
Taxes of art. 268 and
art. 269, cess and surcharge on goods shouldn’t be shared
with states. Also
service tax shouldn’t be shared with J&K. Income tax,
excise, customs, security transaction tax, service tax
should be shared.
devolution between states should be based on following
[weight-age – 15%]
1971 and 2011 census [17%]
Difference with respect to 13th
discipline removed as criteria, population -2011 and
forest cover added as
additional benefits for
special category states. Also sector specific grants
268: levied by union and collected and kept by states.
E.g. Stamp duty on
cheque, promissory notes, insurance policy, and share
transfer. Excise on
medicinal, toiletry preparation using alcohol and
269: levied and collected union but fully assigned to
states. E.g.: central
sales tax [belongs to exporter state]
are unable to mobilize resources and depend on state
The state finance commissions are created rarely and their
implemented but not within timeframe. They are constituted
in a manner that
their work isn’t in sync with the central finance
disburse 2lac crore to rural bodies and 87000 cr. to urban
bodies. Out of
which in case of rural bodies 90% must be disbursed and
10% additional based on
performance. Similarly for urban bodies 80% must be
disbursed and remaining 20%
based on performance.
share its own taxes with the local bodies like
professional tax, mining royalty, advertisement tax.
properties can’t be taxed by state
or local bodies the union should compensate them.
Q.With Reference to the Fourteenth Finance Commission, which of the following statements is/are correct?
1. It has increased the share of States in the central divisible pool from 32 percent to 42 percent
2. It has made recommendations concerning sector-specific grants
Select the correct answer using the code given below. (UPSC CSAT 2015)
Both 1 and 2
Neither 1 nor 2
Ans . A
The commission has recommended states’ share in net proceeds of tax revenues be 42 per cent, a huge jump from the 32 per cent recommend by the 13th Finance Commission, the largest change ever in the percentage of devolution. As compared to total devolutions in 2014-15, total devolution of states in 2015-16 will increase by over 45 per cent.
No sector specific grant recommendations were made.