Finance Commission of India
The Finance Commission of India is established in 1951 to define the financial framework between the central government and state governments, it is a quasi-judicial body set up under Article 280.
It is periodically constituted by the President of India. The Indian Constitution defines the financial relationship between the state and centre.
The first Finance commission was established in 1951 under The Finance Commission (Miscellaneous Provisions) Act 1951. It aims to minimize the fiscal imbalance such as vertical and horizontal imbalances between the Centre and the states.
The finance commission of India is set up every five years and normally constituted two years before the period.
According to the constitution, the Finance committee will consist of a Chairman and four other members.
It is a temporary body and it is an autonomous body governed by the Government of India. The 14th finance commission was formed in 2013 and its recommendations were valid from 1st April 2015 to 31 March 2020.
The 15th Finance commission was formed in November 2017 and its recommendations will be implemented from 1 April 2020. The Current Chairman is N.K.Singh(2017).
Objectives and Function of Finance Commission of India
Article 280 (3) is about the functions of the finance commission of India.
It is the duty of the Finance Commission of India to make recommendations to the president of India as:
The Distribution of Taxes among the Centre and States, also the percentage of share of tax between the states.
As per Article 275, to determine the quantum of grants-in-aid to be given by the central government to the states and to define rules governing the eligibility of the state for getting such grants.
The distribution of taxes between the states and central is defined every five years by the Finance Commission of India.
The 15th Finance commission will begin in April 2020. Any other issues such as debt reliefs, financing of calamity relief of states, additional excise duties, etc are referred to the president of India by the commission.
Allocation of resources to the local bodies such as Panchayat and Municipalities.
History of Finance Commission of India
India is a Union of States, it suffers from Fiscal imbalances.
Fiscal imbalances between the state and centre result from states ( state and central) revenue and its expenditure.
This fiscal imbalance usually widens over time. To address the fiscal imbalances, then the law minister of India, B.R.Ambedkar established the Finance Commission in 1951.
Already there are several Articles mentioned in the constitution of India regarding resource sharing between the states and centre. They are:
- Article – 269
- Article -268
- Article -270
- Article -275
- Article -282
- Article -293
In addition to the above provisions, the Finance Commission of India acts as an institutional framework for resource sharing between states and centre.
Qualifications of its Chairman and Members
A Judge of High Court or one qualified same as Judge of High Court. One who has specialized knowledge of Finance and Accounts of Government.
One who has knowledge in administration and financial expertise or special knowledge of economics.
Why finance commission is quasi judicial?
It is because it has all power of civil court by Code of Civil Procedure (1908) in matters of summoning & enforcing attendance and requisitioning any public record from any court of office.
And Finance Commission shall be deemed to be a civil court for purposes of sections 480 and 482 of the CrPC provided under Finance Commission Act”.
The finance commission works as an arbitrator, it means to distribute taxes among unions and states. Therefore it is called a Quasi-Judicial body.