As against share of 6.16% of total tax devolution during 13th Finance Commission award

As against share of 6.16% of total tax devolution during 13th Finance Commission award, North Eastern States now get 7.94% of total tax devolution under 14th Finance Commission (FFC) award. 


Apart from estimated share in Central Taxes of Rs. 3,13,375 crore during 14th Finance Commission (FFC) award period, FFC also recommends grant-in-aid of Rs.63,206 crore for North Eastern States.

Share of central taxes have increased by 251%, grant-in-aid by about 44% and in overall there is an increase of 183% in untied resources transferred to eight NE States under the recommendations of FC.

During 2015-16, Rs.32,657 crore (i.e.79%) as devolution of taxes, and Rs.11,433 crore (i.e.89%) as FFC grants have been released to the 8 North Esatern States.

For speedy development of North-eastern States, a Rs.740 crore is budgeted this year for schemes approved by North Eastern Council (NEC).
For Revenue deficit grants, Rs. 51,137 crore has been recommended to 6 North Eastern States assessed to be in deficit post devolution of central taxes, for local bodies Rs.8,866 crore and Central share to SDRF Rs.3,202 crore.

 



North Eastern and hill States have several unique features that have a bearing on their fiscal resources and expenditure needs and on federal fiscal relations. Taking into account the disabilities arising from constraints unique to each State like low level of economic activity and the consequential low revenue capacity in terms of low tax base, low per capita income; the disability arising from large forest cover and hilly terrain; remoteness and having international borders; infrastructure deficit etc. 14th Finance Commission (FFC) has arrived at expenditure requirements.


In fact, apart from estimated share in Central Taxes of Rs. 3,13,375 crore during FFC award period, it has recommended grant-in-aid of Rs.63,206 crore for NE States. For Revenue deficit grants, Rs. 51,137 crore has been recommended to 6 States assessed to be in deficit post devolution of central taxes, for local bodies Rs.8,866 crore and Central share to SDRF Rs.3,202 crore. As against share of 6.16% of total tax devolution during 13th FC award, NE States now get 7.94% of total tax devolution under FFC award. There is greater predictability and certainty now in the quantum of funds flowing to the States apart from the overall increase in untied funds.

The transfer of Statutory Resources or untied fund flow to NE States in aggregate have gone up to Rs.54,385 crore in 2015-16, from Rs.30,072 crore in 2014-15, indicating an increase of 81%. The details are shown in the table below:

Sl. No.
State
2013-14
2014-15
2015-16 (BE)
Increase over 2014-15
FC Tax Devolu-tion
FC Grant
Total
FC Tax Devolu-tion
FC Grant
Total
FC Tax Devolu-tion
FC Grant
Total
1
Arunachal Pradesh
1046
763
1809
1110
921
2031
7232
159
7391
5360
264%
2
Assam
11575
508
12082
12284
1130
13414
17401
3283
20684
7270
54%
3
Manipur
1439
1741
3180
1527
1827
3354
3238
2122
5360
2006
60%
4
Meghalaya
1302
883
2185
1382
783
2165
3371
643
4014
1849
85%
5
Mizoram
858
1083
1941
911
1055
1966
2414
2166
4580
2614
133%
6
Nagaland
1001
1994
2996
1063
2023
3085
2614
3224
5838
2753
89%
7
Sikkim
763
258
1021
809
515
1325
1925
49
1974
649
49%
8
Tripura
1630
1071
2702
1730
1002
2732
3369
1175
4544
1812
66%

Total
19613
8302
27915
20815
9257
30072
41564
12821
54385
24313
81%

 






So far an amount of Rs.32,657 crore (i.e.79%) as devolution of taxes, and Rs.11,433 crore (i.e.89%) as FFC grants have been released to these 8 North Eastern States. The States will get 3 more installments of ‘tax devolution’ during the month of March 2016 and balance of grant-in-aid recommended by FFC.
As recommended by the Committee under the Chief Minister, Madhya Pradesh (MP), sharing pattern of CSS for North Eastern States and other Himalayan States has been retained at 90:10 for core schemes and 80:20 for other schemes even though FFC has not made any distinction between special and general category states. For the North Eastern States, an amount of Rs.18,640 crore (65%) has been released against Rs.28,546 crore allocation from various line Ministries Budget under CSS/CASP.
The special support provided to the North Eastern States for socio-economic, security related expenditure and infrastructural gap funding under NEC, NLCPR and funding provided to Sixth Schedule areas is unique. The North Eastern Council (NEC) gets direct funding from the Union Government. Rs.740 crore is provided for schemes of NEC during 2015-16.

 
Further, Government of India has provided Rs.1,000 crore as one time assistance for areas covered under Sixth Schedule in Assam, Meghalaya, Mizoram and Tripura.

                                                                                             
As such, continued special focus, particularly in terms of social and economic infrastructure with Inter-State significance is being given by the Union Government to this region.

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Promotion of Payments through cards and digital means 
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for introduction of steps for promotion of payments through cards and digital means. The move aims at reducing cash transactions. Several short term (to be implemented within one year) and medium term measures (to be implemented within two years) have been approved for implementation by the Government Ministries/ Departments/ Organisations. 


Promotion of payments through cards and digital means will be instrumental in reducing tax avoidance, migration of Government payments and collections to cashless mode, discourage transactions in cash by providing access to financial payment services to the citizens to conduct transactions through card/ digital means and shifting payment ecosystem from cash dominated to non-cash/less cash payments.

The essential features of the proposals for promotion of payments through cards and digital means include steps for withdrawal of surcharge/service charge/ convenience fee on card/ digital payments currently imposed by various Government Departments/organisations and introduction of appropriate acceptance infrastructure in Government Departments/ organisations; rationalization of Merchant Discount Rate (MDR) on card transactions and a differentiated MDR framework for some key transaction segments; mandating payments beyond a prescribed threshold only in card/ digital mode; introduction of formulae linked acceptance infrastructure by the stakeholders of certain card products; rationalisation of telecom service charges for digital financial transactions; promotion of mobile banking; and creation of necessary assurance mechanisms for quick resolution of fraudulent transactions and review the payments ecosystem in the country.

Background:

The infrastructure of card/ digital payments is growing, but remains modest in comparison to cash payments. For card/ digital payments to increase, they should be easy to use, readily available and accepted, should not impose any undue financial burden on the merchant and user, and should offer an appropriate level of security.

While the payment system initiatives taken in the form of Electronic Clearing Service Scheme, National Electronic Funds Transfer, Real Time Gross Settlement Scheme etc. have been impressive, the benefits of modern card/ digital payment systems are yet to reach all sections of the society and be accepted across the length and breadth of the country. Current experience and evidence indicates that the penetration and success of modern card/ digital payment products and services is concentrated to a large extent in the tier-l and tier-ll locations of the country and mostly to those citizens who have access to the formal banking channels.

The introduction of the Payment and Settlement Systems Act, 2007 has resulted in deeper acceptance and penetration of modern card/ digital payment systems in the country, Aadhaar Enabled Payment Systems (AEPS) has been brought to effect to leverage upon biometric verification and a domestic card network namely, RuPay.

The Reserve Bank of India has also recently approved licences for setting up of Payments Banks with the objective of greater financial inclusion by the Payments Banks by providing small savings accounts and payments/ remittance services to migrant labour workforce, low income households, small businesses, other unorganised sector entities.


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Agreement between India and Maldives for avoidance of double taxation of income from International air transport 
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval forsigning of an Agreement between India and Maldives for the avoidance of double taxation of income from international air transport.

The Agreement provides for relief from double taxation for airline enterprises of India and Maldives by way of exemption of income derived by the enterprise of India from the operation of aircraft in international traffic, from Maldivian tax and vice-versa. Under the agreement, profits from the operation of aircraft in international traffic will be taxed in one country alone.Accordingly the taxing right is conferred upon the country to which the enterprise belongs. The Agreement will provide tax certainty for airline enterprises of India and Maldives.

The Agreement further provides for Mutual Agreement Procedure for resolving any difficulties or doubts arising as to the interpretation or application of the Agreement. 

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