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Which of the following is not a recommendation of the Fifteenth Finance Commission? 1. The Finance Commission has considered the 2014 population along with forest cover, tax effort, area of the state, and “demographic performance” to arrive at the states’ share in the divisible pool of taxes. 2. The Commission has reduced the vertical devolution to 41%. 3. The Commission has developed a criterion for the demographic effort which is the ratio of the state’s population in 1971 to its fertility rate in 2011.

Which of the following is not a recommendation of the Fifteenth Finance Commission? 1. The Finance Commission has considered the 2014 population along with forest cover, tax effort, area of the state, and “demographic performance” to arrive at the states’ share in the divisible pool of taxes. 2. The Commission has reduced the vertical devolution to 41%. 3. The Commission has developed a criterion for the demographic effort which is the ratio of the state’s population in 1971 to its fertility rate in 2011. Correct Answer 1 only

The correct answer is 1 only.

Key Points

Recommendations of the Fifteenth Finance Commission

  • The share of states in the centre’s taxes is recommended to be decreased from 42% during the 2015-20 periods to 41% for 2020-21. Hence, Statement 2 is correct.
    • The 1% decrease is to provide for the newly formed union territories of Jammu and Kashmir, and Ladakh from the resources of the central government.
  • The Finance Commission has considered the 2011 population along with forest cover, tax effort, area of the state, and “demographic performance” to arrive at the states’ share in the divisible pool of taxes. Hence, Statement 1 is incorrect.
  • Criteria for devolution:
    • Income distance: 45%
    • Population (2011): 15%
    • Area:15%
    • Forest and Ecology: 10%
    • Demographic performance: 12.5%
    • Tax Effort: 2.5%.
  • The Demographic Performance criterion has been introduced to reward efforts made by states in controlling their population. Hence, Statement 3 is correct.
    • It will be computed by using the reciprocal of the total fertility ratio of each state, scaled by 1971 population data.
  • Tax effort has been used to reward states with higher tax collection efficiency.
    • It is the ratio of the average per capita own tax revenue and the average per capita state GDP during the three-year period between 2014-15 and 2016-17.
  • The Commission observed that financing capital expenditure through off-budget borrowings detracts from compliance with the FRBM Act.
    • It is recommended that both the central and state governments should make full disclosure of extra-budgetary borrowings.
    • The outstanding extra-budgetary liabilities should be clearly identified and eliminated in a time-bound manner.

Additional Information

  • The Commission highlighted some challenges with the implementation of the Goods and Services Tax (GST)
    • A large shortfall in collections as compared to the original forecast
    • High volatility in collections
    • accumulation of large integrated GST credit
    • Glitches in invoice and input tax matching
    • Delay in refunds

Related Questions

Which of the following is/are recommendation of the Fifteenth Finance Commission? The Finance Commission has considered the 2011 population along with forest cover, tax effort, area of the state, and “demographic performance” to arrive at the states’ share in the divisible pool of taxes. The Commission has reduced the vertical devolution to 42%. The Commission has developed a criterion for the demographic effort which is the ratio of the state’s population in 1971 to its fertility rate in 2011.
In the following question, the 1st and the last part of the sentence/ passage are numbered 1 and 6. The rest of the sentence/passage is split into four parts and named P, Q, R and S. These four parts are not given in their proper order. Read the sentence/passage and find out which of the four combinations is correct. 1. The Goods and Services Tax (GST) is imposed on the supply of products and/or services within the country. P. This can be achieved by charging uniform tax rates and eliminating economic barriers. Q. The objective of GST is to drive India towards becoming an integrated economy. R. These include Service Tax, Purchase Tax, Central Excise Duty, Value Added Tax, Entry Tax, Luxury Tax, Local Body Taxes, etc. S. It subsumes multiple indirect taxes that are imposed by the State Governments or the Central Government 6. Thus, it will make the country a common national market
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Which of the following components are true about tax planning?
1. Tax planning is the process of analyzing a financial plan or a situation from a tax perspective.
2. The objective of tax planning is to make sure there is tax efficiency. With the help of tax planning, one can ensure that all elements of a financial plan can function together with maximum tax-efficiency.
3. Reducing tax liability and increasing the ability to make contributions towards retirement plans are critical for success.
4. Tax planning comprises various considerations such as size, the timing of income, timing of purchases, and planning are concerned with other kinds of expenditures.
5. The chosen investments and the various retirement plans should go hand-in-hand with the tax filing status as well as the deductions in order to create the best possible outcome.
Consider the following statements: 1. As per recent amendment to the Indian Forest Act, 1927, forest dwellers have the right to fell the bamboos grown on forest areas. 2. As per the Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006, bamboo is a minor forest produce. 3. The Scheduled Tribes and Other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006 allows ownership of minor forest produce to forest dwellers. Which of the statement given above is/are correct?
Read the passage carefully and select the best answer to each question out of the given four alternatives.
The Amazon basin has been continuously inhabited for at least 10, 000 years, possibly more. Its earliest inhabitants were stone-age peoples, living in hundreds of far-flung tribes, some tiny, others numbering in the tens of thousands. It was from the west that Europeans explorers first arrived. In 1541 a Spanish expedition from Quito, led by Gonzalo Pizarro, ran short of supplies while exploring east of the Andes in what is today Peru. Pizarros cousin Francisco de Orellana offered to take 60 men along with the boats from the expedition and forage for supplies. De Orellana floated down the Rio Napo to its confluence with the Amazon, near Iquitos (Peru), and then to the mouth of the Amazon. Along the way his expedition suffered numerous attacks by Indians; some of the Indian warriors, they reported, were female, like the Amazons of Greek mythology, and thus the worlds greatest river got its name. No one made a serious effort to claim this sweaty territory, however, until the Portuguese built a fort near the mouth of the river at Belém in 1616, and sent Pedro Teixeira up the river to Quito and back between 1637 and 1639. During the 17th and 18th centuries, Portuguese bandeirantes (groups of roaming adventurers) penetrated ever further into the rain forest in pursuit of gold and Indian slaves, exploring as far as present-day Rondônia, and the Guaporé and Madeira river valleys. Amazonian Indians had long used the sap from rubber trees to make waterproof bags and other items. European explorers recognized the potential value of natural latex, but were unable to market it because it tended to grow soft in the heat, or brittle in the cold, and thus had limited appeal outside the rain forest. However, in 1842 American Charles Goodyear developed vulcanization (made natural rubber durable) and in 1890 Irelands John Dunlop patented pneumatic rubber tires. Soon there was an unquenchable demand for rubber in the recently industrialized USA and Europe, and the price of rubber on international markets soared. As profits skyrocketed, so did exploitation of the seringueiros, or rubber tappers, who were lured into the Amazon, mostly from the drought-stricken northeast, by the promise of prosperity only to be locked into a cruel system of virtual slavery dominated by seringalistas (owners of rubber-bearing forests). Rigged scales, hired guns, widespread illiteracy among the rubber tappers, and monopoly of sales and purchases all combined to perpetuate the workers debt and misery. In addition, seringueiros had to contend with jungle fevers, Indian attacks and all manner of deprivation.
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Arrange the following demographic transition theory given by Blackur (ascending order)
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3. Early expanding phase marked by high fertility
4. High stationary phase marked by high fertility and mortality
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A university library budget committee must reduce exactly five of eight areas of expenditure—I, J, K, L, M, N, O and P—in accordance with the following conditions: If both I and O are reduced, P is also reduced.
If L is reduced, neither N nor O is reduced.
If M is reduced, J is not reduced.
Of the three areas J, K, and N exactly two are reduced. Question : If both K and N are reduced, which one of the following is a pair of areas neither of which could be reduced?
Which of the following is/are among the noticeable features of the recommendations of the Thirteenth Finance Commission? 1. A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design. 2. A design for the creation of lakhs of jobs in the next ten years in consonance with India's demographic dividend. 3. Devolution of a specified share of central taxes to local bodies as grants Select the correct answer using the codes given below: