Question

Which of the following statements is/are correct about the reporting process of the Finance Commissions?

i. The Central Finance Commission submits its report to the President, who presents it to both Houses of Parliament.

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

iii. The President provides an explanatory memorandum on actions taken based on the Central Finance Commission’s recommendations.

• A. i and iii only
• B. i only
• C. ii and iii only
• D. None of the above

Answer 1

Answer:

A. i and iii only

Finance Commissions in India

• Constitutional Mandate: Finance Commissions are established under Article 280 of the Constitution of India. They play a crucial role in the fiscal federalism of India by recommending the distribution of tax revenues between the Union and the States, and among the States themselves.

• Central Finance Commission's Report:

  • The Finance Commission, constituted by the President of India, submits its report directly to the President.

  • The President, in turn, causes the report to be laid before each House of Parliament.

  • Following the presentation, the President is required to lay down an explanatory memorandum before Parliament, indicating the action taken on each recommendation made by the Finance Commission. This memorandum also includes the reasons for the non-acceptance of any recommendation, if any.

• State Finance Commission:

  • State Finance Commissions are constituted by the Governor of the respective State under Article 243-I and 243-Y of the Constitution.

  • Their reports are submitted to the Governor of the State.

  • The Governor then causes these reports to be laid before the State Legislative Assembly (and the Legislative Council, if it exists in the state).

  • Similar to the Central Finance Commission, an explanatory memorandum on the action taken on the recommendations is also to be laid before the State Legislature.

• Significance for Competitive Exams: Understanding the reporting mechanism, constitutional articles, and the role of both Central and State Finance Commissions is vital for questions related to Indian Polity and Governance. Pay close attention to the exact procedure of tabling reports and the accompanying explanatory memorandums, as these details are often tested.