Call for Greater Fiscal Autonomy: States Demand Higher Tax Devolution and Reform

At a meeting in Thiruvananthapuram, Finance Ministers from five Opposition-ruled States demanded an increase in the divisible pool of taxes from 41% to 50% and sought a cap on the Centre's collection of cesses and surcharges. This comes amid concerns over reduced devolution to economically stronger States like Gujarat, Karnataka, Maharashtra, and Tamil Nadu, which contribute significantly to tax revenues. The GST framework and current Finance Commission recommendations have restricted the States’ ability to raise revenue and address their specific developmental needs, including climate and industrial challenges.

Additionally, these States face underfunding for key projects like Bengaluru's Suburban Rail Project and Kerala’s Vizhinjam Port, as well as limited financial assistance for disaster relief in the wake of natural calamities. As the Sixteenth Finance Commission prepares its recommendations, there is a growing call for reform in the tax devolution framework to grant greater fiscal autonomy to the States, ensuring a more federal and participatory governance model that addresses regional disparities and contingency needs.