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  3. Need Fiscal Council like institution to better manage debt trajectory of Centre, states: NK Singh

Need Fiscal Council like institution to better manage debt trajectory of Centre, states: NK Singh

09 Mar 2021 Evaluate

15th Finance Commission Chairman NK Singh has called for setting up a Fiscal Council like institution to better manage the debt trajectory of the Centre and states. He also highlighted the ‘substantial’ increase in the proportion of cess and surcharge in Gross Tax Revenue (GTR) in the past 10 years, saying only if a Constitutional amendment is introduced to include a portion of it into the divisible pool, then states' could get a share of the revenue earned under that head.

Talking about the fiscal challenges, Singh said apart from the issue of consolidated roadmap or debt trajectory, two other issues continue to be dominant in the fiscal space. He said ‘these are lack of a fiscal institution in India by way of Fiscal Council or any other institution. Fact that we are one of those countries which have some kind of fiscal architecture, but does not have independent fiscal institutions is a factor that needs to be kept in mind.’ He noted that the second issue is since the world in general, investors and rating agencies focus not only on the debt trajectory of the central government but of the general government (centre and states together), there is a need for an institutional framework, which will cover both these as partners.

On the issue of cess and surcharge, he said the proportion of cess and surcharge in 2010-11 was 10.4 per cent of GTR. It increased to 19.9 per cent in BE of 2020-21. He said if we take out the 3 percentage points of GST compensation cess, then 10.4 per cent has gone up substantially to 16.5 per cent.’ He also said that it should not be the situation that the finance commission raises the devolution to the states and then the Centre increases cess and surcharge, thereby neutralising the impact of higher devolution. He added that cess and surchage do not form part of the divisible pool of tax revenue that goes to the states. 

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