Fifteenth Finance Commission of India

Finance Commission of India - Background Context

The report presented by the Fifteenth Finance Commission, alongside an Action Taken Report, has been suggested or recommended in Parliament. The Commission, led by Nand Kishore Singh (popularly known as N.K. Singh), had submitted its assessment report back to the President’s desk in lately in December 2019.

Fifteenth Finance Commission of India

What is the Finance Commission? 

The Finance Commission of India is established by the President under the article 280 of the Constitution of India, primarily to offer its recommendations and proposals on the distribution of tax revenue generated or gathered by the tax collection, between the Union Govt. and the States Govt. and amongst the several States Governments.

Two differentiating features of the Fifteenth Finance Commission’s work include redressing the vertical disparity between the taxation powers and expenditure accountability or liability of the Union Govt. and the States Govt. respectively and uniformity of all public services across the States.

What are the functions of the Finance 

It is the duty and within the primary scope of the Commission to propose or suggest to the respected President as to:
  1. The dissemination between the Union Govt. and the States Govt. of net revenue of taxes which are to be, or may be, distributed between them and the issuance between the States of the respective shares of such proceeds; 
  2. The protocols which should control the grants-in-aid of the yields (revenues) of the States out of the Consolidated Fund of India; 
  3. Any other matter stated to the Commission by the President within the scope of sound finance. 
The Commission regulates its procedure and have such authority within the performance of their functions as Parliament may by law communicated to them.

Appointment of the Finance Commission Qualification Required.

The Finance Commission is established and determined by the President under the Article 280 of the Constitution of India.

As per the arrangement seated or accommodated within the Finance Commission [Miscellaneous Provisions] Act, 1951 and the Finance Commission (Salaries & Allowances) Rules, 1951, the Head or the Chairperson of the respective Commission is chosen from among few selected people who have had experience publicly affairs, and therefore the four other members are nominated from among peoples who:
  1. Existing, have been or been qualified to get nominated as Judges of High Court; or 
  2. Have thorough knowledge economics, finance and Govt. accounts; or 
  3. Wide influx of extensive experience financial situations and administration; or 
  4. Subject matter expertise in economics; 

First Commission and Commission Constituted so 

  • Establishment of first Commission: 22nd November 1951 
  • First Chairperson: K.C. Neogy 
  • Date of the appointment of First Chairperson: 06th April 1952 
  • Total Commission constituted: 15 (Fifteen) 
Note: New Commission is constituted and established every five year.

Necessity for a Finance Commission? 

The Indian federal system enables for the division of authorities and duties between the Union and States. Accordingly, the taxation authorities also are broadly bifurcate between the Union and States. State legislatures may delegate or transfer few of their taxation authorities to local bodies.

Need for permanent status: 

Finance commissions since the past couple of decades embrace different approaches with reference to principles of tax distribution, grants to be transfer to states and fiscal amalgamation issues. In other words, there has got to be progression and alteration between finance commissions.

There is a requirement to make sure broad consistency between Finance Commissions in order that there's a point of certainty within the flow of funds, especially to the respective states. This has become an even more critical within the post GST scenario.

If it's given permanent status, the Finance Commission can operate as a leaner institution within the intervening period till subsequent Finance Commission is established in a full-fledged manner. During the interceded period, it also can address issues arising from deployment of the proposals of the finance commission.

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