Question

Choose the correct statement(s) regarding the State Finance Commission.

i) It is constituted under Article 243-I and Article 243-Y of the Indian Constitution.

ii) The State Finance Commission can have a maximum of five members, including the Chairman.

iii) The Commission has the powers of a civil court under the Code of Civil Procedure, 1908.

iv) The State Finance Commission submits its report directly to the State Legislative Assembly.

• A. i and iii
• B. ii and iv
• C. i and ii
• D. iii and iv

Answer 1

Answer:

A. i and iii

State Finance Commission (SFC) in India

Constitutional Basis:

• The State Finance Commission is established under Article 243-I and Article 243-Y of the Indian Constitution.

• Article 243-I deals with the Finance Commission of the States, and Article 243-Y makes provisions for the Finance Commissions of the Municipalities.

Composition of the SFC:

• The Governor of the state constitutes the State Finance Commission.

• The Act of the State Legislature determines the composition of the SFC.

• It typically consists of a Chairman and four other members.

• The qualifications and selection methods for members are also decided by the State Legislature.

Functions and Powers:

• The primary function of the SFC is to review the financial position of Panchayats and Municipalities and recommend measures to strengthen their financial base.

• It advises the Governor on matters like:

  • Distribution between the State and the local bodies of the net proceeds of taxes, duties, tolls, and fees levied by the State.

  • Assignment to the local bodies of all or any of the revenues levied and collected by the State.

  • Grants-in-aid to the local bodies from the Consolidated Fund of the State.

• The SFC is vested with the powers of a civil court while trying a suit under the Code of Civil Procedure, 1908. This includes summoning witnesses, requiring the discovery and production of documents, and receiving evidence on affidavits.

Reporting Mechanism:

• The State Finance Commission submits its report to the Governor of the state.

• The Governor then causes the report, along with an explanatory memorandum of the action taken thereon, to be laid before the State Legislative Assembly.

Key Points for Exams:

• The SFC is a constitutional body, not a statutory one.

• It aims to ensure fiscal decentralization and strengthen local self-governance.

• The recommendations of the SFC are advisory in nature.