The Thirteenth Finance Commission on Wednesday submitted its report to President Pratibha Patil and suggested a new path for fiscal consolidation for the next five years. Finance Minister Pranab Mukherjee said the recommendations of the Commission,would be getting reflected in the 2010-11 budget (to be presented in the Lok Sabha in February next year). Talking to reporters at his office,Finance Commission chairman Vijay Kelkar said,We had been asked to suggest new path for fiscal consolidation.we have recommended fiscal path for the next five years (2010-15). The report,likely to be made public in February,will be given by the President to the finance ministry,which will take it up with the Cabinet. The Cabinet will then adopt the report and is expected to table it in the Budget session of Parliament. The fiscal deficit,which reflects the government borrowing,is expected to widen to 6.8 per cent in the current fiscal due to various stimulus measures taken by the government to boost the struggling economy due to the global financial meltdown. Kelkar said the report deals with sharing of tax revenues between the centre and states and distribution of funds among the local bodies. The report comes at a time when the Centre is on its way for some major tax reforms in both direct and indirect taxes. Goods and Services Tax (GST),which promises to reduce the multiplicity of taxes and their cascading effect,and the Direct Tax Code,which is likely to reduce the overall burden of tax payers,are the two major tax reforms the government is working on. GST would subsume both centre and state levies like excise,VAT and service tax from April 1,next year and the Direct Taxes Code,will replace the Income Tax Act,1961. It is currently in the public domain for debate and suggestions. The Finance Commission was set up in November 2007,as per the constitutional requirement,to suggest devolution of tax receipts between the centre and the states. The government extended the term of the Commission in September 2009 up to January end and requested it to submit the report by December so as to give effect to its suggestions in the Budget. Besides Kelkar,other members of the Commission are B K Chaturvedi,Indira Rajaraman,Atul Sarma and Sanjiv Misra. At present,states and the Union Territories get Rs 1.64 lakh crore in a year,or around 30 per cent of the shareable taxes collected by the Centre. The total tax revenue of the government,which include shareable and non-shareable taxes,has been estimated at Rs 6,41,079 crore during 2009-10. The Twelfth Finance Commission had recommended that 30.5 per cent of the shareable central taxes should be shared among the states and the Union Territories . In the report,the Commission has also suggested steps to deal with the growing off-budget expenditure,especially oil bonds. Kelkar said the report also looked at the implications of environment and climate change,ways to improve outcomes and outputs of public expenditure,and impact of GST on trade. However,Kelkar added,Theres no recommendation on the tax structure. Its on the revenue sharing between the Centre and the states . rates were not talked about,its the revenue sharing, he said.
