Who constitutes state finance commission?

Q.  Which of the following is/are true?

1) The composition of the state finance commission may be provided by the state government.
2) Article 280 deals with State finance Commission.

- Published on 10 Mar 17

a. Only 1
b. Only 2
c. Both 1 and 2
d. None of the above

ANSWER: Only 1
    Provisions related to Finances in 73rd Constitutional Amendment Act of 1992 -

    Article 243 H - The state legislature may -

    1. authorise a panchayat to levy, collect and appropriate taxes, duties, tolls and fees;

    2. assign to a panchayat taxes, duties, tolls and fees levied and collected by the state government;

    3. provide for making grants-in-aid to the Panchayats from the consolidated fund of the state; and

    4. provide for constitution of funds for crediting all moneys received by or on behalf of the Panchayats.

    Constitution of the Finance Commission -

  • Article 243 I - The governor of a state shall constitute a finance commission to review the financial position of the Panchayats.

  • The commission will be constituted every five years.

  • Recommendations to the Governor by the commission would be as to -

    a) the principles which should govern -

    1. the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between the Panchayats at all levels of their respective shares of such proceeds;

    2. the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by, the Panchayats;

    3. the grantsin-aid to the Panchayats from the Consolidated Fund of the State; and

    b) the measures needed to improve the financial position of the Panchayats;

    c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Panchayats.

  • The composition of the commission, the required qualifications of its members and the manner of their selection may be provided by the State Legislature.

  • Report including recommendations of the commission and action taken shall be placed before the State Legislature by the Governor.

  • The Central Finance Commission will also suggest measures needed to augment the consolidated fund of a state so as to supplement the resources of the Panchayats in the states.

  • This would be based on the recommendations made by the finance commission of the state.


  • HARSH SHARMA   -Posted on 19 Sep 17

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