Union Cabinet may consider constitution of 16th Finance Commission today: Report

According to reports, the Union Cabinet may discuss the formation of the 16th Finance Commission during a meeting set for late November 28.

The Cabinet is due to meet in New Delhi at 8 p.m., and the formation of the panel may be debated, according to CNBC-TV18. At the time of publication, there had been no official announcement.

The 16th Finance Commission will be responsible with laying out the framework for center-state financial relations for the next five years. Its predecessor, the 15th Finance Commission, issued its report in November 20 for fiscal years ranging from FY 21-22 to FY 25-26.

Previously, Finance Secretary T V Somanathan informed news agency PTI in August that the 16th Finance Commission would be formed by the end of November.

"The Finance Commission is expected to be formed by the end of November because that is the statutory requirement," he said in an interview with the news agency.

One of the key duties of the 16th Finance Commission will be to propose a tax distribution ratio for the Centre and states during a five-year period beginning April 1, 2026.

Tax devolution is a significant source of funding for governments, which is utilized for development, welfare, and priority-sector initiatives and schemes. Currently, 41 percent of taxes collected by the Centre are devolved to states in 14 installments over the course of a fiscal year.

Experts say that although India's economic impetus has slowed in recent years, the competition for public cash has only risen.

The central government and state governments have been at odds over a number of issues, including the central government's increased use of cesses, compensation for shortfalls in GST (goods and services tax) revenues, and the demand on the 15th Finance Commission to carve out funds for central subjects such as defense and internal security.

From the 11th to the 14th Finance Commission, the share of net proceeds recommended for devolution to states increased each time: from 29.5% to 30.5% to 32% to 42%. Net revenues are defined in Article 279 of the Constitution as the center's gross tax revenue less surcharges, cesses, and collection costs.