Current Affairs: Passage of the Day - 01 March 2025 | Current Affairs: Daily, Weekly & Monthly - CLAT PDF Download

Directions: Read the passage carefully and answer the questions that follow.
The government is looking to cut central tax revenues that it shares with states receive, reported news agency Reuters, quoting three sources with knowledge about the development.
The suggestion will be made to the Finance Commission of India, according to the report. It may be noted that the Finance Commission of India makes recommendations on tax sharing along with other aspects of centre-state fiscal relations.
The Arvind Panagariya-led panel will submit its recommendation by October 31, with an aim of getting it implemented from the financial year 2026-27, noted the Reuters report.
The central government is likely to recommend a reduction in the share of tax revenue going to states to at least 40% from the current 41%, added one of the sources quoted in the report.
Another source quoted in the report said the proposal is likely to be cleared by the cabinet of ministers headed by Prime Minister Narendra Modi by the end of March, following which it would be sent to the Finance Commission.
Based on the expected tax collections for the ongoing financial year, the report noted that a 1% swing in the states’ share of tax revenue could give the central government about Rs 3,500 crore.
One of the sources pointed out that the share of taxes going to the state governments has increased from 20% in 1980 to 41% now. At the same time, spending requirements for the central government have also increased due to the ongoing economic slowdown.
According to sources quoted in the report, this has led to calls for a lower share of tax revenues going to states. The Ministry of Finance and the Finance Commission have not yet issued any response related to the matter.
​[Excerpt from India Today "Indian Government Proposes Tax Revenue Cuts for States" Dated 01/03/25]

Q1: What percentage of federal tax revenues do Indian states currently receive?
(a) 35%
(b) 40%
(c) 41%
(d) 45%

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Q2: What is the proposed new share of tax revenues for Indian states?
(a) 38%
(b) 39%
(c) 40%
(d) 42%

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Q3: How much additional revenue will the federal government generate from the 1% reduction in tax revenue sharing?
(a) Rs 20,000 crore
(b) Rs 35,000 crore
(c) Rs 50,000 crore
(d) Rs 75,000 crore

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Q4: When is the Finance Commission expected to submit its recommendations?
(a) March 2025
(b) June 2025
(c) October 2025
(d) December 2025

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Q5: What is the projected fiscal deficit of the Indian federal government for 2024-25?
(a) 3.2% of GDP
(b) 4.8% of GDP
(c) 5.5% of GDP
(d) 6.1% of GDP

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