Question

Consider the following statements:

The function(s) of the State Finance Commission is/are

1. To recommend the sharing of net income of state-levied taxes between the Government and Panchayats.

2. To make recommendations to the President of India on financial matters concerning local bodies.

3. To exercise the powers of a civil court in enforcing the attendance of witnesses.

4. To ensure that the resources of the municipalities are supplemented on the basis of recommendations made by the Central Finance Commission.

Which of these statements is/are correct?

• A. 1 and 3
• B. 2 and 4
• C. 1, 3 and 4
• D. 1, 2 and 3

Answer 1

Answer:

A. 1 and 3

State Finance Commission (SFC) in India

• The State Finance Commission is a constitutional body established under Article 243-I of the Constitution of India.

• It is constituted by the Governor of a State every five years.

• The primary objective of the SFC is to review the financial position of Panchayats and Municipalities and to recommend measures for their financial strengthening.

Functions of the State Finance Commission:

• Distribution of State's Net Proceeds: Recommends the distribution of the net proceeds of taxes levied and collected by the State, which may be shared between the State Government and the Panchayats (Article 243-H).

• Assignment of Taxes/Duties/Tolls/Fees: Recommends the assignment of taxes, duties, tolls, and fees levied and collected by the Panchayats.

• Grants-in-Aid: Recommends grants-in-aid to Panchayats from the Consolidated Fund of the State.

• Measures to Augment Consolidated Fund: Suggests measures to augment the consolidated fund of a Panchayat to supplement the resources of the Panchayats on the basis of the recommendations made by the Finance Commission of India.

• Powers and Functions: Recommends powers and functions that may be entrusted to Panchayats by the State Legislature.

• Other matters: Recommends any other matter referred to it by the Governor in the interest of the financial health of Panchayats.

Key Points for Competitive Exams:

• The SFC is modeled on the lines of the Finance Commission of India (Article 280).

• The recommendations of the SFC are advisory in nature and are not binding on the State Government.

• While the SFC makes recommendations concerning local bodies, it does not directly make recommendations to the President of India on financial matters concerning local bodies; this is primarily the domain of the Finance Commission of India.

• The SFC has the powers of a civil court, such as enforcing the attendance of witnesses and compelling the production of documents, to perform its functions.