5 Interesting Facts About Special Category Status

India is a “union of states.” India now consists of 28 states and six union territories. All of these states and union territories receive a portion of the central government’s taxes every five years, based on the recommendations of the President of India’s Finance Commission.

5 Interesting Facts About Special Category Status

In addition to the Finance Commission’s recommendations, Article 275 of the Indian constitution allows the federal government to provide further financial support to any state.

This page explains the requirements for granting Special Category State designation to specific states, as well as the benefits obtained by these states.

It’s worth noting that 11 of India’s 29 states have already been designated as Special Category States, with five more requesting the designation.

The ‘Special Category States’ are a set of eleven economically poor hill states in India that share international borders. 

The transfer of central resources to states through the Planning and Finance Commissions, as well as the constitutional difficulties involved, types of plan support, and the evolution of the Gadgil formula. 

What does it mean to be in a Special Category?

On the basis of the Gadgil Formula, the fifth Finance Commission (Chairman Mahavir Tyagi) granted Special Category State status to three states (Jammu & Kashmir, Assam, and Nagaland) in 1969.

The social, economic, and geographical backwardness of these three states was the rationale for their special status.

Criteria for granting Special Category State designation;

1. A state that is experiencing a resource shortage
2. Low income per capita.
3. The state’s finances are unsustainable.
4. Lack of economic and infrastructure development.
5. There is a sizable tribal population in the area.
6. Terrain that is hilly and tough
7. It is strategically located near international boundaries.
8. Population density is low.

Benefits for States in the Special Category:

1. To encourage investment, states with Special Category Status are excluded from excise duty, customs duty, corporate tax, income tax, and other taxes.
2. The Centre bears 90% of the state spending (provided as a grant) on all centrally-sponsored initiatives and foreign aid, while the remaining 10% is handed to the state as a zero-interest loan. States in the general category receive 70% of the funds as a loan and 30% as a grant.
3. ‘Special Category’ States receive a whopping 30% of the federal budget’s scheduled spending.
4. Unique Category Debt shifting and debt alleviation initiatives are available to states.
5. the Unique Category States are given priority treatment when it comes to receiving central funds, which encourages development projects to their jurisdictions.
6. Unique Category If a state has unspent money at the end of a fiscal year, it does not expire and can be carried forward to the next fiscal year.

The central government covers 90% of state spending on all centrally sponsored initiatives and foreign aid, while the remaining 10% is granted to the state as a zero-interest loan.

Preferential treatment when it comes to receiving cash from the government.

Excise duty reductions to entice businesses to the state.

Special category states receive 30% of the federal government’s total budget.

Debt-swapping and debt-relief programmes are mainly available to these states.

To encourage investment, states with the special category status are excluded from customs duty, corporate tax, income tax, and other taxes.

If a special category state has money left over at the end of a fiscal year, it does not expire and can be carried over to the next fiscal year.

Special Category Status is currently held by the 11 states.

1. Manipur

2. Meghalaya

3. Mizoram

4. Arunachal Pradesh

5. Tripura

6. Sikkim

7. Uttarakhand

8. Himachal Pradesh

9. Assam

10. Jammu & Kashmir

• Nagaland

  Conclusion:

  India is referred to as a “federation of states.” There are presently 29 states and seven union territories in India. Based on the President of India’s Finance Commission’s recommendations, all of these states and union territories receive a percentage of the federal government’s revenues every five years. The ‘Special Category States’ in India are a group of eleven economically impoverished hill states that share international boundaries.