The 13th Finance Commission for 2010-15 headed by Vijay L Kelkar has recommended a model GST structure that includes features such as single rate, zero rating of exports, inclusion of various indirect taxes at the central and state level in GST ambit, major rationalization of the exemption structure. It has recommended a grant of Rs 50000 crore for implementation of GST as per the recommended model. This grant is to be distributed initially in the form of compensation for loss due to implementation of GST and residual amount to be distributed amongst states in the terminal year of the award period as per the devolution formula. It has also recommended administrative structure for implementation and monitoring of this grant.

The Union government has accepted the recommendation of the 13th Finance Commission in principle but would not be able to implement it in the forthcoming Budget as further discussions with state governments would take place on the modalities.

The commission has also recommended that the Empowered Committee of State Finance Ministers should be transformed into a statutory council. The compensation should be disbursed in quarterly instalments on the basis of the recommendations by a three-member compensation committee comprising of the secretary, department of revenue in the Union government, secretary to the Empowered Committee and chaired by an eminent person with experience in public finance.

The states should take steps to reduce the transit time of cargo vehicles crossing their borders by combining check posts with adjoining states and adopting user-friendly options like electronically issued passes for transit traffic.

Keeping in view the urgent need for action for combating climate change, the commission has recommended three grants to states of Rs 5000 crore each. The first grant is for forest conservation, the second is for promotion of renewable sources of energy and the third is for the water sector.

The commission has reviewed the existing arrangement of financing relief expenditure in the light of the Disaster Management Act, 2005 and has recommended merger of the National Calamity Contingency Fund (NCCF) into National Disaster Response Fund (NDRF) and merger of Calamity Relief Fund (CRF) into State Disaster Response Fund (SDRF) with effect from April 1, 2010 and transfer of balances in the existing funds into the new funds.

The commission has assessed the relief expenditure needs of all states and recommended that 75% of the SDRF requirement for general category states and 90% for special category states be met by the central government through a grant to the states. It has also recommended a grant of Rs 525 crore for capacity building. Overall tomeet the central share of sDRF and for capacity building, the commission has recommended a grant of Rs 26373 crore. It has mandated all states to follow the required accounting practices to properly account for relief expenditure.

The commission has assessed the need of providing elementary education for each state based on Sarva Shiksha Abhiyan norms and recommended to provide a grant of Rs 24068 crore equivalent to 15% of the assessed needs.

The Commission has recommended six grants to states aggregating to Rs 14446 crore for improving outcomes. An incentive grant for reduction in infant mortality of Rs 5000 crore is to e released to states starting from 2012-13 depending on the reduction in infant mortality rate achieved by the states with reference to the baseline level of 2009-10 figures. A grant of Rs 5000 crore for improved delivery of justice has been recommended for Lok Adalats and Legal Aid, Alternate Dispute Resolution Centres, Heritage Court Buildings, State Judicial Academy and training of judicial officers and public prosecutors. The grant for Unique Identification (UID) programme amounting to Rs 2989.10 crore is to be released based on the number of people covered under the uID database. Two grants of Rs 616 crore each have been recommended for District Innovation Funds and improving statistical systems at district and state levels. A grant of Rs 225 crore has been recommended for setting up database of employees and prisoners.

The commission has also recommended performance grant for local bodies, debt relief to states, grants for maintenance of roads and bridges, non-plan revenue deficit grant, formula for sharing of central government taxes and formulated a fiscal roadmap.