The panel, which will be constituted by the President in the next few days, is proposed to be given a simple mandate rather than expanding to include issues such as GST or ease of doing business, as was the case in the past. .Official sources said the Center wanted to avoid any controversy and had chosen a simple set of terms of reference.
At the cabinet meeting late on Tuesday night, the government decided to limit the mandate to formulating principles that, apart from controlling grants, would also enhance the state’s consolidated fund to supplement the resources of panchayats and municipal bodies. Apart from the measures. Additionally, it will review the arrangements for funding disaster management initiatives, Union Information and Broadcasting Minister Anurag Singh said. Thakur Said.
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Under the Constitution, the Center has to constitute a Finance Commission every five years. Thakur said the 16th Finance Commission would be given two years to finalize its report.
At present, states are entitled to 41% share of the divisible pool, which includes all central taxes except cess and surcharge. Additionally, 1% of central taxes is to be shared with Jammu and Kashmir and Ladakh, which became Union Territories after the formation of the 15th Finance Commission headed by NK Singh.
States are demanding a larger share of the pie, arguing that they have to bear the burden of several schemes announced by the Centre. On its part, the Center believes that it is funding several schemes like health and education which are part of the mandate given to the states.
The process of constituting the Finance Commission was initiated last month with the setting up of an advance cell. Amid indications that the former finance secretary could be made the chairman, Thakur said an announcement would be made soon.