The Union Cabinet on Wednesday cleared the setting up of the 15th Finance Commission that will prescribe the formula for devolution of taxes between the Centre and States for the five years commencing on April 1, 2020.

“The next step is to appoint the personnel of the Commission and finalising its terms of reference... It will be done very soon,” Finance Minister Arun Jaitley said at a media briefing after the Cabinet meeting here on Wednesday.

The Finance Commission, a statutory body under Article 280(1) of the Constitution, is set up every five years to decide on how the net proceeds of taxes would be shared between the Centre and States. It also decides the principles for grants-in-aid of the revenues of the States out of the Consolidated Fund of India.

This time round, the panel will have a more unusual task with the roll out of the Goods and Services Tax. “There have been many changes. The expenditure pattern of the Centre and States should be maintained and the impact of the new tax on the finances of both…the pattern has changed with the GST,” Jaitley noted.

When asked whether the 15th Finance Commission will also allocate more resources to States, he said: “Let us not pre-judge the situation. India is a Union of States; the Union also has to survive.” In the Union Budget 2017-18, the Finance Ministry had been allotted ₹10 crore for setting up the 15th Finance Commission.

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