NK Singh, Chairman of the 15th Finance Commission, said that he was worried about the finances of the states, even though by and large they are meeting their targets under the Fiscal Responsibility and Budget Management (FRBM). “The 14 percent compensation that was guaranteed to the states brought about a degree of complacency in revenue collection,” Singh said in an interview with CNBC-TV18. He also said that “Frequent rate changes increases the cost of compliance”.
According to Singh, the ideal way would be deciding on a standard rate and moving towards greater rationalization. However, he is optimistic about the GST collections rising in the future, “We expect GST numbers to look up significantly. GST reforms would be an on-going challenge. The rationalization and continuity of rates and GST collections would be significantly better in the future,” he said.
When asked whether the states would continue to receive 14 percent compensation, Singh said that the matter was not under the purview of the Finance Commission, but the GST Council. “The compensation was only for five years under the Act. It would need an act by Parliament to be passed for it to be changed,” he said. With regards to the defence expenditure, Singh has formed a committee headed by Singh himself and the Defence Secretary and the Home Secretary on the issue.