The First Report of the Ninth Finance Commission
covering the financial year 1989-90 is being laid on the Table
of the House. A summary of the main recommendations in the
Report is contained in Chapter XII of the Report.
The recommendations of the Finance Commission
regarding devolution of Income Tax, Union Excise Duties, Additional
Duties of Excise in lieu of Sales Tax, Grants-in-aid in lieu
of tax on Railway Passenger Fares, Financing of relief expenditure,
and Debt relief have been accepted. In regard to Grant-in-aid
Government accept the recommendations of the Finance Commission
with the proviso that the recommendation relating to Grant-in-aid
for meeting the requirements of the revenue component of the
State Plan may be kept in view by the Planning Commission,
while finalising the funding arrangements for the Annual Plans
of the States for 1989-90.
The other recommendations of the Commission
not relating to immediate devolution, will be considered separately.
The First Report of the Ninth Finance Commission
and the memorandum on the Government's decision on the recommendations
made therein were laid on the Table of the House on 2nd September,
1988. This is to lay on the Table of the House the amendments
to that report proposed by the Commission subsequently to
correct a few minor computational errors that had crept into
the Report. The amendments are:-
i) the share of Union Territories in the
net proceeds of income tax earlier fixed at 1.044% (Para 5.30
of the Report) is revised to 1.124%;
ii) States' share in the net proceeds of
income tax earlier indicated as Rs. 2990.38 crores (Col. (i)
of Table 9 on page 53 of the Report) is revised as Rs. 2987.94
crores i.e. Rs. 2.44 crores less; and
iii) as a result of the reduction in the
States' share of income tax, the grants given to the following
deficit States, are increased by the amount shown against
each-
(Rs. In crore)
The Government has accepted the amendments
in the First Report as proposed by the Ninth Finance Commission.
Sd/-
(S.B. Chavan)
Finance Minister
New Delhi
February 23, 1989
Explanatory Memorandum as to the
action taken on the recommendations made by the Ninth Finance
Commission in its Second Report submitted to the President
on 18th December, 1989
The Second Report of the Ninth Finance
Commission covering the five years period commencing from
the 1st of April, 1990 together with the Explanatory Memorandum
on the action taken on the recommendations of the Commission
is being laid on the Table of the House, in pursuance of
Article 281 of the Constitution. A summary of the Commission's
main recommendations relating to devolution of taxes and
duties to the States, grants-in-aid under Article 275 of
the Constitution, financing of relief expenditure and debt
relief to the States and other matters, is summarised in
Chapter-XI of its Report.
A SHARES OF CENTRAL TAXES AND DUTIES
For the period of five years commencing
from the 1st of April, 1990, recommendations contained in
the Second Report of the Finance Commission relating to
sharing of Income tax, Union Duties of excise, additional
excise duties in lieu of States' sales tax, have been accepted.
The recommendation of the Commission relating to grants
in lieu of the repealed tax on railway passenger fares has
also been accepted by Government.
B GRANTS-IN-AID OF THE REVENUES
OF STATES UNDER THE SUBSTANTIVE PROVISION OF ARTICLE 275
OF THE CONSTITUTION
(i) Grants-in-aid to cover non-Plan gap
on Revenue Account:
The Government have accepted the recommendations
contained in the Second Report of the Commission for payment
of grants-in-aid of the revenues of certain States under
the substantive provision of Article 275 (I) of the Constitution
towards meeting their non-Plan revenue gap as assessed by
the Commission for the five years 1990-95.
(ii) Grants-in-aid to cover part of deficits
on Plan Revenue Account:
The Government have accepted the recommendations
of the Commission for the payment of grant-in-aid to certain
States to cover a part of the deficit of such State Governments
on plan account for the five years commencing from the 1st
of April, 1990. These grants will be taken into account
by the Planning Commission as a resource for financing the
States' Plans.
C RECOMMENDATIONS ON OTHER TERMS
OF REFERENCES
(i) Financing of Relief Expenditure:
The Government have accepted, in principle,
the recommendations of the Commission relating to financing
of relief expenditure and setting up of a Calamity Relief
Fund in each of the States. The arrangements for the custody
and operation of the Fund will be separately worked out
in consultation with the Comptroller & Auditor General
of India and the Reserve Bank of India.
The recommendation of the Commission on
grants to the Madhya Pradesh Government for the Bhopal Gas
Leak disaster will be considered as a part of the general
scheme for providing interim compensation to gas leak victims.
(ii) Debt Relief:
The Government have accepted the recommendations
of the Commission in regard to rescheduling/write off of
certain loans outstanding against State Governments and
elongation of the maturity period of future Central loan
for State Plans from 15 years to 20 years with 50 per cent
loans enjoying a grace period of 5 years have been accepted.
The other recommendations on debt relief requiring in depth
examination will be considered in due course.
D NOTE OF DISSENT
The report of the Commission has appended
to it a Note of Dissent on certain recommendations. The
Government have carefully considered the note and decided
to accept the recommendations of the majority as indicated
in paras 2,3, and 4 above.
E IMPLEMENTATION
The Commission's recommendations fall in
three categories:
(i) Those to be implemented by an Order
of the President.
(ii) Those to be implemented by Law of
Parliament.
(iii) Those to be implemented by executive
order.
The recommendations under Article 270 and
275(1) of the Constitution relating to income tax and grants-in-aid
respectively fall in the first category and the necessary
order will be submitted to the President for approval. Recommendations
relating to distribution of Union Excise duties including
Additional Duties of Excise in lieu of sales tax (Under
Article 272 of the Constitution) fall in the second category.
Necessary legislation will be promoted for implementing
them. The recommendations relating to distribution of grants
to States in lieu of tax on railway passenger fares and
rescheduling of Central Loans will be implemented by executive
order.
The Commission has made certain other recommendations
in the Report. These do not require any immediate action
and will be considered in due course.
Sd/-
(Madhu Dandavate)
Finance Minister
New Delhi
March 12, 1990
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