EPFO ENFORCEMENT OFFICER STUDY MATERIAL & BOOKS 2020:INDIAN ECONOMYABOUT FINANCE COMMISSION
EPFO ENFORCEMENT OFFICER STUDY MATERIAL & BOOKS 2020:
INDIAN ECONOMY
Constitutional Provisions
Article 280 of the Constitution of India provides for a Finance Commission as a quasi judicial body.
It is constituted by the president of India every fifth year or at such an earlier time as he considers necessary.
Composition
The Finance Commission consists of a chairman and four other members to be appointed by the president.
They hold office for such a period as specified by the president in his order.
As per The Finance Commission Rules, 1951,The chairman should be a person having experience in public affairs and the four other members should be selected from amongst the following:A judge of high court or one qualified to be appointed as one.
A person who has specialised knowledge of finance and accounts of the
government.
A person who has wide experience in financial matters and in
administration.
A person who has special knowledge of economics
Functions
The Finance Commission is required to make recommendations to the president of India on the following matters:The distribution of the net proceeds of taxes between the Centre and states, and among the states.
The principles that should govern the grants-in-aid to the states by the Centre out of the consolidated fund of India.
The measures needed to augment the consolidated fund of a state to supplement the resources of the panchayats and the municipalities in the state on the basis of the recommendations made by the state finance commission.
Any other matter referred to it by the president in the interests of sound finance.
Mandate of the commission
Ensuring inclusiveness is a key mandate of the Finance Commission. For ensuring inclusiveness it works on following two fronts
Vertical Distribution-Between the taxation powers and expenditure and responsibilities of the federal government and the states.
Horizontal Distribution-Between states that are at different stages of development.
It involves assigning weights to things like population, the fiscal distance between the top ranked states and the others, etc for optimum distribution.
Changing role of Finance Commission
Scale of distribution of tax proceeds between centre and states has changed drastically. From 10% of the total tax receipts of the Centre in 1950, it rose to a record 42?ter the recommendations of the Fourteenth Finance Commission headed by Y V Reddy.The Fifteenth Finance Commission has recommended that this allocation be reduced by a percentage point to 41%.
The terms of reference of the Commission too, have been widened. The Thirteenth Commission was mandated to assess the impact of the (then) proposed GST from April 1, 2010.
The other significant change has been in the equation between the central and state governments as a result of the recommendations of the Twelfth Finance Commission which reshaped lending by the federal government to states.Rather than the Centre borrowing and then lending to states, it recommended that states be allowed to borrow directly.
Commission headed by Rangarajan also recommended that if states were to be given debt relief over and above the distribution of tax proceeds, conditions of fiscal discipline should be enforced.
Recommendations of 15th Finance Commission(Chair: Mr N. K. Singh)
Devolution of taxes to states: The share of states in the centre’s taxes is recommended to be decreased from 42% during the 2015-20 period to 41% for 2020-21.
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