Synopsis:
- Introduction
- Explanation of article 280
- Article 280(1)
- Article 280(2)
- Article 280(3)
- Other provisions regarding the functions of the finance commission
-Article 269
-Article 270
- Article 271
-Article 274
- Article 275
-Article 282
- Article 280(4)
4. Article 281
5. Importance of Finance Commission
6. Report of Finance Commission
7. Conclusion
Introduction:
The word "finance" literally means- the management of large amount of money , especially by government and by large companies. Similarly India being a federal country decided to manage its funds with or through the establishment of the "Finance Commission". The expert Committee on the Financial Provisions of the constitution recommended the setting up of the Finance Commission.The recommendations of the Committee resulted in the inclusion of article 280 which is in chapter 1 of Part 12 of the Indian Constitution.
Article 280(1) of the constitution says about the establishment of Finance Commission that the President shall within two years from the commencement of the constitution and thereafter at the expiration of every fifth year or earlier by order ,constitute a finance commission which shall consist of a chairman and four other members.
The 1st Finance Commission of Independent India was establishment in the year 1951, with the chairmanship of Mr. K.C. Niogi . Today, India is having its 14th Finance Commission with the chairmanship of Mr. Y. V. Reddy, the former Governor of RBI.
Explanation of Article 280:
Article 280(1) talks about the setting up of the Finance Commission . It says that within 2 years from the commencement of the constitution and thereafter at the expiration of every fifth year or earlier , President by order constitute a finance commission which shall consist of a chairman and 4 other members appointed by him .
The members of the commission shall hold office for such period as may be specified by the president in his order and shall be eligible for reappointment .
Clause (2) of article 280 ,says that parliament may by law determine the qualifications and manner for the appointment of the members of the commission.
Clause (3) of article 280,is the important clause as it determines clearly the duties and the functions of the Finance Commission. According to this clause, two main functions of the commission can be concluded-
1st: To make recommendations as to what proportion of the central taxes is to be distributed among the states, and;
2nd: To determine the principles which should govern the grant-in-aids of the revenues of the states out of the Consolidated Fund Of India.
The duties of Finance Commission has been enlarged by 73rd and 74th constitutional amendment in 1992 which make s the duty of the commission to suggests the measures needed to augment the Consolidated Fund of States to supplement the resources of the
Panchayats and Municipalities in the state.
OTHER PROVISIONS REGARDING THE FUNCTIONS OF THE FINANCE COMMISSION:
As regards to the other functions , as the distribution of taxes , the finance commission also keeps eye on the proper execution of the following articles ,which specify the type of distribution among both the bodies:
1.Article 268-Duties levied by the Union but collected and appropriated by the States.
According to article 268 the Union shall levied stamp duties and other duties on excise on medicinal and toilet preparations . These duties are collected by the states and assigned to them.
2.Article 269-Taxes levied and collected by the Union but assigned to States.
According to this article , a part of taxes and duties levied and collected by the central government should be given to the States.This article provides the imposition of taxes on the sale and purchase of goods and consignment of goods.Here, the phrase "sale and purchase of goods" does not include newspapers.
3.Article 270-Taxes levied and distributed between Union and States.
This article says that taxes on income other than agricultural income shall be levied and collected by the Union but shall be distributed between Union and the State on the basis of the recommendations of the Finance Commission. However , surcharge under article 271 and cess levied by Parliament shall form a part of consolidated fund of India , i.e., it shall not be distributed.
4.Article 271-Surcharge on certain duties and taxes for the purpose of the Union.
Thfis article states that the Union may time to time increase the duties and taxes referred in articles 269 and 270 by a surcharge for the purpose of Union to form a part of the Consolidated Fund of India.
5.Article 274-Prior recommendation of the President required to bills affecting taxation in which states are interested.
This article states that no bill which consist any imposition and variance related to the matters of tax and duty in which states are interested , or which varies the meaning of "agriculture income" or which affects the distribution of money in states,or impose a surcharge for the purpose of the Union shall be introduced in either house of Parliament except on the recommendation of the President.
6.Article 275-Grants from the Union to certain States.
Parliament shall have the power to determine by law each year the amount of grant-in-aids to be allocated to the States which are in need of assistance .Different sums may be fixed for different states. Such grant-in-aids shall be charged upon the Consolidated Fund of India and shall form part of revenues of the concerned states.
7.Article 282-expenditure defray able by the Union or a State out of its revenues.
Under this article Union and State make grants for many public purpose even if it relates to a subject over which it can not make law.
Finance (Miscellaneous Provisions) Act, 1951:
An act named, Finance (Miscellaneous Provisions) Act 1951 has passed by the Parliament. It provides the manner of selection of the members of the finance commission.
It states that the chairman of the commission should be selected from among the persons who have had experience in public affairs and the four other members should be selected from among the persons who:
- are,or have been ,or are qualified to be appointed as the judge of the high court,
- are,or have knowledge of finance and accounts of governments,or
- have had wide experience in financial matters and in administration,or
- have specified knowledge of economics.
Article 281 :
This article is about the recommendations of the finance commission. It states that the President shall cause the recommendation to be laid before each house of Parliament together with the explanatory memorandum as to the action taken thereupon.
Importance of Finance Commission:
Finance Commission of India is dealt with every requisite responsibilities necessary for the financial management of India. It is the body which performs different functions effectively and thus play an important role . The Finance Commission is an important part of India's administration as it provides the following effectiveness to our country:
- Work of the Union as a support system:
2. Parallel Distribution of Responsibility:
The Union and the State have parallel distribution of responsibility among them.It is seen that at some matters union levied and collect taxes and assign them to states and in some matters state collect and assign the levied taxes and duties by the union. In other cases, the taxes levied and collected by the state is distributed by the union and the states both.this type of working policy does not create burden upon the other body and divides the work equally.
3. Circulation of Money:
The recommendations laid down by the finance commission make an effective attempt to circulate the money in the economy.
4. Sound Financing:
The recommendations made by the commission only suggests for the sound financing.It protects the government from imposing ill taxes by suggesting its demerits.
5. Implementation of the welfare schemes:
Funds given to the states on the recommendations of the commission helps in implementing the schemes made by the state legislatures.Implementation of the welfare schemes with the help of such funds results in the upliftment of the society.
6. Welfare of the People:
Funds provided by the Union to the states are for the welfare of public.Union also provide grant-in-aids to the needy states time to time.the welfare of the people leads to the development of the country.
Finance Commission's Report:
The Finance Commission of India submits its report to the president at the expiration of every fifth year. The first finance commission had submitted its report on 1952. The previous thirteenth finance commission has submitted its report on December 2009 and the present fourteenth finance commission will submit its report on October 2014.
Conclusion:
As we have seen the Finance Commission of India acting as an advisory body in money matters, by suggesting recommendations to the President. It always suggest good for the distribution of money among the union and the states and for the sound financing. Thus, it is an essential organisation for the money management in the country.
