Question

Consider the following statements about the State Finance Commission:

1. It is constituted under Article 243-I and Article 243-Y of the Constitution.

2. The Commission’s members may be appointed on a part-time basis.

3. The Commission’s recommendations are enforceable by law.

• A. 1 and 2 only
• B. 1 and 3 only
• C. 2 and 3 only
• D. All of the above

Answer 1

Answer:

A. 1 and 2 only

State Finance Commission

• Constitutional Mandate: The State Finance Commission (SFC) is established under Article 243-I and Article 243-Y of the Indian Constitution. Article 243-I deals with the Finance Commission of a State for Panchayats, while Article 243-Y pertains to the Finance Commission of a Municipality.

• Formation and Appointment:

  • The Governor of a State constitutes the SFC.

  • The SFC consists of a Chairperson and four other members.

  • Members are appointed by the Governor.

  • The qualifications and selection process for members are determined by state legislation.

  • Crucially, members can be appointed on a part-time basis, which is a key aspect for understanding their functioning.

• Functions of the SFC: The SFC reviews the financial position of Panchayats and Municipalities and recommends measures to strengthen their financial base. Its key functions include:

  • Distributing the net proceeds of taxes, duties, tolls, and fees leviable by the State among Panchayats and Municipalities.

  • Assigning to Panchayats and Municipalities powers to levy taxes, duties, tolls, and fees.

  • Providing grants-in-aid to Panchayats and Municipalities.

• Nature of Recommendations: The recommendations made by the State Finance Commission are advisory in nature. They are placed before the State Legislature, which then takes a decision on them. The recommendations are not legally binding or directly enforceable by law. The State government decides on the extent to which these recommendations can be implemented.

• Frequency of Constitution: The SFC is to be constituted every five years, similar to the Union Finance Commission, to ensure a regular review of state and local body finances.

• Distinction from Union Finance Commission: While both are Finance Commissions, the Union Finance Commission (Article 280) deals with the division of financial resources between the Union and the States, whereas the SFC focuses on the financial relations between the State and its local government bodies (Panchayats and Municipalities).