Polity and Governance

Controversy relating to 15th Finance Commission

News Regarding Finance Commission
•Several chief ministers and opposition leaders of southern states have expressed vehement opposition to one particular mandate of the present Fifteenth Finance Commission viz. to use 2011 census population figures instead of 1971 for the purpose of tax devolution.
•It is logical to use the most recent data which would give a snapshot of the nation as it stands today.
•However, the Indian union made a compact with all its states in the mid-1970s to freeze federal allocations based on population size at 1971.
•This was done to ensure states which had managed to tackle their population growth were not penalized by way of lower allocations.
 
15th Finance Commission (FC-15)
•The Fifteenth Finance Commission is an Indian Finance Commission constituted in November 2017 and is to give recommendations for devolution of taxes and other fiscal matters for five fiscal years, commencing 1 April 2020.
•The commission's chairman is N. K. Singh, with its full-time members being Ajay Narayan Jha, Ashok Lahiri and Anoop Singh. 
•Mr N K Singh has recently announced that the commission would submit its report to the Centre latest by December 2019. 
 
What is the Finance Commission?
•The Finance Commission is constituted by the President under article 280 of the Constitution, mainly to give its recommendations on distribution of tax revenues between the Union and the States and amongst the States themselves.
•Two distinctive features of the Commission’s work involve
     •redressing the vertical imbalances between the taxation powers and expenditure responsibilities of the centre and the States respectively and
     •equalization of all public services across the States.
•The Commission determines its procedure and have such powers in the performance of their functions as Parliament may by law confer on them.
 
Functions of the Finance Commission
Commission makes recommendations to the President as to—  
     •the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them and the allocation between the States of the respective shares of such proceeds; 
     •the principles which should govern the grants-in-aid of the revenues of the States 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 in the State on the basis of the recommendations made by the Finance Commission of the State;
     •the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;
     •any other matter referred to the Commission by the President in the interests of sound finance.
 
Appointment and Qualifications 
•The Finance Commission is appointed by the President under Article 280 of the Constitution.  
•Chairman of the Commission is selected from among persons who have had experience in public affairs, and the four other members are selected from among persons who—
     (a) are, or have been, or are qualified to be appointed as Judges of a High Court; or
     (b) have special knowledge of the finances and accounts of Government; or
     (c) have had wide experience in financial matters and in administration; or
     (d) have special knowledge of economics
 
Implementation
•Finance Commission is only an advisory body.
•The recommendations of the Finance Commission are implemented  as under:-
Those to be implemented by an order of the President: The recommendations relating to distribution of Union Taxes and Duties and Grants-in-aid fall in this category.
Those to be implemented by executive orders:  Other recommendations to be made by the Finance Commission, as per its Terms of Reference



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