Role of finance commission in centre- state financial relations.
Answers
The Finance Commission of India was established on 22nd November, 1951. It was established under Article 280 of the Indian Constitution by the President of India. It was formed to describe the financial relations between the centre and the state.
The Finance Commission has been provided for the Indian constitution as part of the scheme of division of financial resources between the two different sets of governments. Finance Commission also serves as as a constitutional body for the purpose of allocation of certain resources of income between the Union and the State Governments.
Key role
The key role Finance Commission in India is to act as an instrument to divide proceeds of divisible taxes between the states and the Union government or in cases of taxes that are collected by the centre but the proceeds of which are allocated between the states, to determine the principles of such allocation.
The Finance Commission of India also determines the principles of governing the grants in aids of the revenues of states out of the consolidated fund of India. It is an important function of the Indian Finance Commission. The commission has the responsibility of considering any matter referred to the commission by the President in the interest of sound finance.
The President under Article 280 lays the recommendations of the finance commission before each House of the Parliament with an explanatory note as to the action to be taken on the recommendations.
The Finance Commission distributes of proceeds of Income-tax between the union and the states. But taxes on the payments of the central government are attributable only to the union territories.