Modi gives more tax share to states |
Prime Minister Narendra Modi on February 24 has promised to give 10% more share of taxes collected to states, establishing a closer federal-state working relaitonship. The government has accepted recommendations of the 14th Finance Commission for increasing share of states in central taxes to 42%. This is the single largest increase ever recommended. The recommendation gives more power to states in determining how they spend this money. The increase could also serve as a confidence-building measure, particularly relevant given that the centre and states are negotiating the introduction of a single goods and services tax (GST) where states will forego most of their taxation powers. Once implemented, GST will stitch together a common national market by subsuming a welter of local levies such as octroi, VAT and others into a single tax.
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