CAG and 16th Finance Commission hold consultation on public finance

CAG of India discusses financial landscape with 16th Finance Commission, focusing on key areas for fiscal improvement and reforms.

Comptroller and Auditor General of India K. Sanjay Murthy on Wednesday (March 5, 2025) held a meeting with the 16th Finance Commission, which was led by its Chairperson Arvind Panagariya, in Bhopal.

“The high-level consultation formed a critical part of the Commission’s ongoing assessment of the financial landscape of the Centre and States. The deliberations mainly focused on three key areas: Union and State finances, local bodies, and Public Sector Enterprises (PSEs), among others,” said the supreme auditing body.

The CAG chief shared various audit findings for the Union and States in different sectors, fiscal challenges and stress points, including the gap between expenditure and non-debt receipts for the Union and States combined, and key areas of concern including a decline in the State Own Tax Revenue (SOTR) buoyancy of States and varying levels of SOTR and Non-Tax Revenue of States.

He drew attention to the need for regular reporting of Off Budget Borrowings, meeting the “Fiscal Responsibility and Budget Management targets and the taking into account post audit liabilities” computed by CAG in its reports.

“...areas such as stamp duty, registration fees, and State excise collections have been identified as having substantial potential for enhanced fiscal performance. Recommendations in this regard include regular updates to market value guidelines, improved classification of property types, and the adoption of modern technology -- such as sensor-based systems and QR codes -- to minimise revenue leakages and improve data accuracy,” it said.

In the realm of Goods and Services Tax (GST) administration, the CAG has proposed several reforms aimed at widening the tax base and enhancing transparency, involving the integration of unregistered goods and service providers into the framework via automated data collection and real-time information systems, along with improvised taxpayer verification processes.

Apart from suggesting standardisation of accounting practices at all tiers of the government, it also highlighted that, as an immediate measure, harmonisation of Local Bodies’ accounts with Central and State accounts could be attempted in top 100 cities.