Finance commission-
- Finance commission is a constitutional body and is mentioned under Article 280 of our constitution.
Composition, Term and Qualification of Chairman and members
Composition-
- Article 280(1) gives detail about composition of Finance commission.
- Finance Commission consists of a Chairperson and four other members to be appointed by the President.
Term –
- President of India appoints Finance commission after every 5 year.
Qualification of Chairman and members-
- There is no mention of qualification of chairman and other members of finance commission therefore parliament has enacted Finance act 1951 in which qualification of Chairperson and other members are mentioned
Chairperson-
- The Chairperson of the Commission shall be selected from among persons, who have or had experience in public affairs.
Other Members –
The other members shall be selected from among persons who:
1) Are or have been or qualified to be appointed, as a Judge of a High Court; or
2) Have expertise in financial and accounts matters; or
3) Are profound administrators; or
4) Have expertise in economics.
Functions and duty-
It shall be the duty of the Commission to make recommendations to the President as to
(a) The distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds;
(b)The principles which should govern the grants in aid of the revenues of the States out of the Consolidated Fund of India;
(c)Any other matter referred to the Commission by the President in the interests of sound finance
The Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may by law confer on them
Other Points-
Report-
- The President has to lay the recommendation made by Finance Commission and its explanatory memorandum before each house of Parliament.
Note-
- The Recommendations of Finance commission is only advisory and not binding on the government.
Who was the chairman of 1st and 2nd Finance commission of India respectively ?
Ans: K.C. Neogy(1951) and K. Santhanam respectively(1956).
- The Fifteenth Finance Commission was constituted on 27 November 2017 under the chairmanship of N.K. Singh
The State Finance Commission (SFC)
- The State Finance Commission (SFC) is a Constitutional body, formed under the 73rd and 74th Constitutional Amendment Act, 1992.
- Article 243 I and 243 Y were inserted by the constitutional amendments
Composition –
- There is no uniformity in composition of state finance commission.
- The Legislature of a State may, by law, provide for the composition of the Commission, the qualifications which shall be requisite for appointment as members thereof and the manner in which they shall be selected
Functions-
(a)Principles that governs finance commission
(i) the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between the Panchayats at all levels of their respective shares of such proceeds.
(ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by, the Panchayats.
(iii)the grants in aid to the Panchayats from the Consolidated Fund of the State.
(b)the measures needed to improve the financial position of the Panchayats.
(c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Panchayats.
Report of Finance commission-
- The Governor shall cause every recommendation made by the Commission under this article together with an explanatory memorandum as to the action taken thereon to be laid before the Legislature of the State.
- These recommendations are not binding on the government
Major issues with working of state finance commissions-
- No periodic formation of State finance commission by the states.
- Delay on the part of State Governments in finalizing the Action Taken Reports and placing them in the state legislatures.
- Lack of reliable data by finance commissions.
- Sometimes the recommendations of state finance commissions are ignored by government.