Gujarat Calls for Boost in State Tax Share: An In-Depth Look at the 16th Finance Commission's Challenges

The Gujarat government has requested an increase in the state’s share of the divisible tax pool from 41% to 50%. This demand is based on the financial burdens states face, particularly in areas like education and health. The 16th Finance Commission, chaired by Arvind Panagariya, is currently visiting different states, including Gujarat, to gather recommendations on tax revenue allocation.

In a significant development, the Gujarat government has urged the 16th Finance Commission to increase the state's share in the divisible tax pool from the existing 41% to 50%. The chairperson of the commission, Arvind Panagariya, confirmed the demand following a day of meetings in Gujarat's capital.

The current share of 41% was established by the 15th Finance Commission, and Gujarat argues that the increased share is necessary to cope with substantial expenses in crucial sectors such as education and health. Other states have also made similar demands, highlighting a growing call for a reevaluation of the financial distribution between the center and states.

Additionally, Gujarat has advocated for urbanization and the Multidimensional Poverty Index to be considered when allocating resources, due to its rapid urbanization and economic contributions. These discussions are part of a broader review process, with the Finance Commission set to finalize its report by October 2025.

(With inputs from agencies.)