Special Category Status(SCS)

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News:Andhra Pradesh has again reiterated its demand for Special Category Status (SCS).

Facts:

About Special Category Status(SCS):

  • A Special Category Status(SCS) is a classification given by Centre to assist in the development of those states that face geographical and socio-economic disadvantage.
  • However, there is no provision of special category status in the Constitution.The concept of SCS emerged in 1969 when the Gadgil formula (that determined Central assistance to states) was approved.

Criteria for special category status:

  • Hilly and difficult terrain
  • Low population density or sizeable share of tribal population
  • Strategic location along borders with neighbouring countries
  • Economic and infrastructural backwardness
  • Non-viable nature of state finances

Benefits states confer with special category status:

  • The central government bears 90% of the state expenditure on all centrally-sponsored schemes and external aid while rest 10% is given as loan to state at zero percent rate of interest.
  • Preferential treatment in getting central funds and Concession on excise duty to attract industries to the state.
  • 30 percent of the Centre’s gross budget also goes to special category states.
  • These states can avail the benefit of debt-swapping and debt relief schemes.
  • States with special category status are exempted from customs duty, corporate tax, income tax and other taxes to attract investment.

States under Special Category status:

  • The Special Category Status(SCS) was first accorded in 1969 to Jammu and Kashmir, Assam and Nagaland. 
  • Since then eight more states have been included (Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand).
  • However,the 14th Finance Commission has effectively done away with the distinction of general and special category status for states except for the Northeastern and hill states.
  • Instead,it suggested that the resource gap of each state be filled through tax devolution urging the Centre to increase the states’ share of tax revenues from 32% to 42% which has been implemented since 2015.