Finance Commission Notes | EduRev

Indian Polity for UPSC CSE

UPSC : Finance Commission Notes | EduRev

The document Finance Commission Notes | EduRev is a part of the UPSC Course Indian Polity for UPSC CSE.
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Composition

  • Art 280 provides for Finance Commission as a Quasi-judicial body.
  • It is constituted by Prez every 5th year or even earlier as required.
  • Consists of a Chairman & other members who hold office for such period as specified by Prez. They are eligible for reappointment.
  • Constitution authorises Parliament to determine qualifications for office. Accordingly, Chairman should be a person having experience in public affairs while 4 other members should be selected from following :
    ≫ A judge of HC or a judge qualified to be one.
    ≫ A person having specialised knowledge of finance & accounts.
    ≫ A person having wide experience in financial matters & in administration
    ≫ A person having special knowledge of economics.

Functions

  • Finance Commission is required to make recommendations to President on following matters :
    ≫ Distribution of net proceeds of taxes to be shared by Centre & States & the allocation of shares between states.
    ≫ Principles that should govern Grants-in-Aid to the States by Centre.
    ≫ Measures required to augment the Consolidated Fund of States to supplement resources of Panchayats & Municipalities on the basis of recommendations by State Finance Commission.
    ≫ On other matters referred to by the President.
  • Commission submits its report to the President, who lays it before the Parliament with a memorandum as to the actions taken so far.

Advisory Role

  • Recommendations made by the commission are only of an advisory nature.
  • It is upto Union Govt to accept the recommendation to share revenue from taxes with States.
  • However, since the Finance Commission is a Constitutional body of Quasi-judicial nature, its recommendations should not be turned down by the Govt unless there are very compelling reasons.
  • Constitution of India envisages the Finance Commission of playing a very important role in ensuring the fiscal balance between Centre & States & among the States themselves.
  • However, due to the establishment of the Planning Commission, now replaced by the NITI Aayog, the role of Finance Commission has been diminished to a certain degree with many planning functions overlapping between the two organisations.
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