Context- Recently the central government has appointed former Niti Aayog vice chairman, Arvind Panagariya as the chairman of the Sixteenth Finance Commission.
Finance Commission
- It is a Constitutionally mandated frame that is at the centre of monetary federalism.
- It is constituted by using the President underneath article 280 of the Constitution, specifically to provide its pointers on distribution of tax revenues between the Union and the States and amongst the States themselves.
- Its operating is characterized through vast and extensive consultations with all levels of governments, therefore strengthening the precept of cooperative federalism.
Composition
- As in keeping with the provisions contained inside the Finance Commission [Miscellaneous Provisions] Act, 1951 and The Finance Commission (Salaries & Allowances) Rules, 1951, the Chairman of the Commission is chosen from amongst men and women who’ve had enjoy in public affairs, and the four other contributors are decided on from amongst people who–
- are, or have been, or are qualified to be appointed as Judges of a High Court; or
- have special information of the finances and bills of Government; or
- have had wide experience in monetary subjects and in management; or
- have special information of economics
Functions
- It is the responsibility of the Commission to make suggestions to the President as to—
- the distribution between the Union and the States of the internet proceeds of taxes which are to be, or can be, divided among them and the allocation among the States of the respective shares of such proceeds;
- the ideas which ought to govern the grants-in-aid of the sales of the States out of the Consolidated Fund of India;
- the measures had to augment the Consolidated Fund of a State to supplement the assets of the Panchayats inside the State on the idea of the tips made by the Finance Commission of the State;
- the measures had to increase the Consolidated Fund of a State to complement the assets of the Municipalities within the State on the premise of the guidelines made via the Finance Commission of the State;
- some other count number cited the Commission by means of the President in the hobbies of sound finance.
Developments
- The First Finance Commission was constituted beneath the chairmanship of Shri K.C. Neogy in 1952.
- Fifteenth Finance Commissions had been Constituted to this point at periods of each five years.
- The Fifteenth Finance Commission was constituted in 2017 against the backdrop of the abolition of the Planning Commission (as also of the distinction between Plan and non-Plan expenditure) and the creation of the products and services tax (GST), which has fundamentally redefined federal financial members of the family.
Challenges
- There have been fifteen so far. Each of them has faced its own precise set of challenges.
- The reorganisation of the State of Jammu and Kashmir into Union Territories – considered one of Jammu and Kashmir and one among Ladakh – gives a new dynamic.
- On the entire the Finance Commission faces new challenges within the system of the evolution of federal polity.
Conclusion and Way Forward
- As an essential Constitutional entity, the Commission is devoted to balancing competing claims and priorities amongst all three degrees of presidency in a credible manner.
- The 16th Finance Commission will suggest the tax revenue sharing components among the Centre and the States for the 5-yr duration starting April 2026.
Source: The Hindu
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