DEMOGRAPHIC CHANGE –AN OBSTACLE FOR TAMIL NADU IN SHARING OF RESOURCES BETWEEN THE UNION AND THE STATES

Abstract

This  research  is  intended  to  assess  the  impact  of  a  new  factor introduced   by   the   Fourteenth   Finance   Commission   namely demographic change in determining the share of Central taxes to the States. There are three main sources of revenue for  the  States  namely, State’s  Own  Tax  Revenue,  Share  from  the  Union  and  Grants-in-aid from  the  Centre. The  States' Own  Tax  Revenue includes  tax  revenue  such  as  VAT  on Petroleum Products, Liquor, SGST, Excise Duty on Liquor, etc., and non-tax revenue such as fee,  fine, charges, etc.,  and  the  State  Governments  are  at  liberty  to  spend  the  amount according to their discretion. Another source of transfer from Centre to the States is Grants-in-Aid. It is meant for three purposes namely, disaster relief, local bodies and revenue deficit as per the recommendations of the Finance Commission. Yet another main source of revenue for the States is sharing of Union taxes. Let us now discuss the factors involved in determining the central taxes to be shared with the States