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 Explanatory
Memorandum as to action taken on the recommendations of
the Fifth Finance Commission in its final Report dated the
31st July, 1969
The Final Report of the Fifth Finance Commission
is being laid on the Table of the House. A summary of the
main recommendations in the Report relating to devolution
of taxes and duties and grants-in-aid is summarised in Chapter
9 of the Report.
The Recommendations relating to the sharing
of income tax, Union excise duties and additional duties of
excise in lieu of States sales tax and payment of grants-in-aid
of the revenues of certain States under Article 275(1) of
the Constitution have been accepted. It will be recalled that
recommendations in respect of estate duty and grants in lieu
of the repealed tax on Railway fares made in the Commission's
Interim Report submitted in October, 1968 have already been
accepted. Necessary adjustments in the devolution of taxes
and duties and grants-in-aid to States for the current year
(1969-70) consequent on the acceptance of the Commission's
recommendations in the Final Report will be made.
The Commission's recommendation that it would
not be desirable to maintain the existing arrangements in
respect of additional excise duties in lieu of State sales
tax formerly levied thereon unless Government after discussing
the matter further with the State Governments can arrive at
a general agreement for the continuance of the present arrangements
with suitable modification has been noted. The matter is proposed
to be placed before the National Development Council.
The Commission's recommendations regarding
devolution will result as pointed out in the Commission's
Report in large revenue surpluses for certain States. The
question of their utilisation is proposed to be discussed
in consultation with the Planning Commission and the concerned
States.
The Commission has expressed the view that
there is hardly any scope in the present circumstances for
levying any of the taxes and duties mentioned in Article 269
of the Constitution which are not levied at present, except
in the case of tax on advertisement in newspapers where it
sees some scope for raising revenue. The Commission has recommended
that the question of the levy of this tax, its rate structure,
exemptions etc. should be examined by Government. This question
will be examined as recommended.
The Commission has made a number of comments
in regard to the effort at resource mobilisation in various
States and has also made several suggestions in respect of
scope for raising revenue by the States. These also will be
examined in consultation with the State Governments.
Sd/-
(I.G. Patel)
Special Secretary to the Government of India
New Delhi.
August 26, 1969.
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