important institutions: Finance commission
The Finance Commission is a constitutional body tasked with allocating specific financial resources between the Union and the states.
important institutions: Finance commission
The Indian Finance Commission -
The Finance Commission is a constitutional body tasked with allocating specific financial resources between the Union and the states. The Indian President formed it under Article 280 of the Indian Constitution. It was established to outline the Centre's financial connections with the states. It was established in 1951.
Article 280 of the Indian Constitution reads as follows:
- The President of India must form a Finance Commission within two years of the start of the Indian Constitution and every five years afterwards.
- The Commission shall be tasked with making recommendations to the President on the distribution between the Union and the States of the net proceeds of taxes that are to be, or maybe, divided between them and the allocation between the States of the respective shares of such proceeds; the principles that should govern grants in aid of state revenues out of the Consolidated Fund of India.
- any other subject addressed by the President to the Commission in the interest of sound finance
- The Commission shall define its method and have such powers in carrying out its tasks as Parliament may provide them by legislation.
Note: The President may appoint a Finance Commission before the five-year term expires if he deems it essential.
Article 281 of the Indian Constitution reads as follows -
It is connected to the Finance Commission's recommendations: The President must lay their recommendation and explanatory statement before each house of Parliament.
Who makes up India's Finance Commission?
The Finance Commission is appointed by the President of India every five years or whenever he deems it essential.
What is the makeup of India's Finance Commission?
Chairman and Members of the Finance Commission
- Chairman: Leads the Commission and oversees its operations. He should have had prior expertise in public affairs.
- There are four members.
- The Parliament legally determines the qualifications of Commission members and their selection processes.
Qualifications of the Chairman and Members of the Finance Commission -
- The four members must be or have been qualified as High Court judges, be competent in finance or have expertise in financial problems, be in administration, or have an understanding of economics.
- The President of the nation makes all appointments.
- Members may be disqualified if they are proven to be of unsound mind, are involved in heinous conduct, or have a conflict of interest.
- The President of India specifies the period of service for Members of the Finance Commission, and in some situations, members are re-appointed.
- The members must work part-time or serve on the Commission as the President directs.
- Members are paid according to the terms of the Constitution.
Finance Commission Functions -
The Finance Commission offers the following recommendations to the President of India:
- The distribution of net tax receipts between the Centre and the states and the allotment of the same amongst states.
- The principles regulating the Centre's grants-in-aid to states from the India Consolidated Fund.
- The processes necessary to expand a state's consolidated fund to improve the resources of the state's panchayats and municipalities are based on the recommendations of the state Finance Commission.
- Any other item referred to it by the President for the sake of sound fiscal management.
- Every five years, the Commission determines the basis for splitting divisible taxes between the Centre and the states and the rules governing state grants-in-aid.
- The President may submit any problem in sound finance to the Commission.
- The Commission's recommendations, coupled with an explanatory memorandum on the government's actions, are brought before the Houses of Parliament.
- The FC assesses the increase in a state's Consolidated Fund to allocate the resources of the state Panchayats and Municipalities.
- The FC has adequate authority to carry out its tasks within the scope of its activities.
- The FC has all of the functions of a Civil Court, according to the Code of Civil Procedure 1908. It can summon witnesses and request the production of any public document or record from any office or court.
Finance Commission's Advisory Role:
The Finance Commission's recommendations do not legally bind the government because they are only advisory. The government must implement its recommendations for giving money to the states. In other words, "nowhere in the Constitution is it provided that the recommendations of the Commission should bind the Government of India or that the receipt of the funds proposed by the Commission shall amount to a legal entitlement favouring the recipient states."
