Q. With reference to the Finance Commission, which of the following are its roles/functions?
1.Recommends on the distribution of tax revenues between the central and state governments.
2.Changes the tax rates and policies of the central government.
3.Establishes the principles governing tax allocation among states 4.Shapes the fiscal federalism and development trajectory of India.
5.Responsible for managing the finances of the Indian government.
Select the correct answer from the codes given below:
Explanation –
Statement 1, 3 and 4 are correct. One of the primary functions of the Finance Commission is to recommend the distribution of tax revenues between the central government (Union) and the state governments. This ensures that states receive a fair share of tax resources to support their developmental needs.
The Finance Commission also establishes the principles governing the allocation of taxes among the states. This involves considering various factors such as the population, income levels, and development needs of each state. The aim is to ensure equitable distribution of tax resources across India.
The Finance Commission’s recommendations play a significant role in shaping the fiscal federalism and development trajectory of India.
Statements 2 and 5 are incorrect. The Finance Commission does not have the authority to directly change the tax rates and policies of the central government. These matters are primarily determined by the central government through legislative processes. It is also not responsible for the overall management of the Indian government’s finances. This responsibility falls under the purview of the Ministry of Finance and other relevant ministries and departments.
Source: ForumIAS
