Constitutional Provision With Regard To Finance Commission

According to Article 280, the Finance Commission is a constitutional entity. A Finance Commission must be appointed by the Indian President every five years or sooner. In accordance with the Constitution and the necessities of the time, it establishes the process and formula for dividing tax income between the Centre and the states as well as among them. The 15th Finance Commission was constituted by the Indian President in November 2017 and is presided over by NK Singh. It will offer recommendations for the five years 2021–2022–2025–2026.

 

•    The Indian Constitution's Article 280 establishes the Finance Commission as a quasi-judicial authority.

 

•    It is established by the Indian president every fifth year or sooner if he deems it necessary.

 

•    The Finance Commission's role is to make recommendations on how tax income should be distributed between the Union and the States as well as among the States themselves.

 

•    The Finance Commission's recommendations were covered by Article 281 of the Indian Constitution.

 

•    The Finance Commission has two distinguishing characteristics:

 

•    Addressing the vertical disparities between the authority to tax and the responsibility to spend.

 

•    State-wide equalization of all public services.

 

•    The Constitution 73rd Amendment Act of 1992 established the State Finance Commission for the States of India to handle local government issues.

 

•    The president appoints the chairman and the other four members of the Finance Commission.

 

•    They are in office for however long the president specifies in his order. They are capable of being reappointed.

 

•    Qualifications: Under the Constitution, Parliament has the authority to specify the requirements for commission members and the process for selecting them.

 

•    As a result, Parliament has established the requirements for the commission's chairman and members.

 

•    The four other members should be picked from the following, and the chairperson should have experience in public affairs.

 

•    A high court judge or a candidate for such a position.

 

•    A person with specific understanding of government finances and accounting.

 

•    A person with extensive administrative and financial skills.

 

•    A person with extensive economics understanding.

 

•    Members who are determined to be incompetent, guilty of a heinous act, or to have a conflict of interest may be removed from office.

 

•    The President of India determines the members' terms of office, which are typically five years, with the possibility of reappointment in certain circumstances.

 

•    The members are required to provide the Commission with volunteer or part-time labor as the President requests.

 

•    The President may name a Finance Commission before the five years if s/he thinks it's necessary.

 

It is the Commission's responsibility to advise the President on:

•    The allocation of the Union's and the States' respective parts of the net tax proceeds that must be or may be divided between them, as well as the distribution of these proceeds among the States.

 

•    The rules that should control grants-in-aid made from State resources derived from the Consolidated Fund of India.

 

•    The actions required to increase a state's consolidated fund in order to supplement the panchayat's resources on the basis of the recommendations provided by the state's finance commission.

 

•    On the basis of the recommendations given by the finance commission of these states, the actions required to increase a state's consolidated fund in order to supplement the resources of the state's municipalities.

 

•    Any additional issues that the President may refer to the Commission in the interest of prudent financial management.

 

•    The Commission sets its own policies and is given the authority that Parliament may legally provide it when carrying out its duties.

 

The President receives the report from the Finance Commission. The President then presents the Finance Commission's report to each House of Parliament for discussion. The Finance Commission's proposals are carried out as follows:

 

•    These will be put into effect by a presidential order: This topic includes ideas for the distribution of union taxes, duties, and grants.

 

•    Those that will be put into effect through executive orders are: The suggestions for the distribution of petroleum profits, debt reduction, central assistance methods, etc.

 

•    The government is not required to abide by the Finance Commission's recommendations because they are solely advisory in nature. The Government must put its suggestions for giving money to the states into action.

 

•    Financial Commission's Early Years

 

•    To strengthen the British Rule's economic hegemony in India, the fundamental draught of the provisions of the finance commission of India was created in the early 1920s.

 

•    In order to address these disparities, Dr. B.R. Ambedkar, the country's then-minister of law, founded the first Finance Commission in 1952, which was presided over by Shri K.C. Neogy.

•    On the basis of the proposed Acts and Rules, it was constituted.

 

•    A number of provisions, such as Article 268, which permits the Centre to levy duties but gives the States the authority to collect and retain them, were previously put into the Indian Constitution to bridge the fiscal gap between the Centre and the States. 

 

With the creation of the organizing Commission, the work of the Finance Commission was delegated because the Planning Commission is now responsible for allocating funds to the states in addition to organizing the country's development plans. The former Planning Commission was replaced with NITI Aayog, which was institutionalized by the Union Cabinet to address this problem. A step in the right direction towards decentralizing finance is abolishing the Planning Commission and increasing support of the 15th Finance Commission's plan to transfer 41% of taxes to the States.