Cabinet approves new finance panel (TH)

Cabinet approves new finance panel (TH)

Context

Fifteenth Finance Commission will have its task cut out with the new tax system

What has happened?

The Union cabinet has approved constitution of the Fifteenth Finance Commission that will decide the formula for sharing of taxes between the Centre and states for five years starting April 1, 2020. The government has set aside 10 crore for 15th Finance Commission in the budget for FY18.

Article 280

Article 280 of the Constitution requires setting up of a finance commission within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year

Primary task of FC

• The primary task of the commission is to decide the formula for the distribution between the Centre and the states of net proceeds of taxes and the horizontal allocation of the devolution among states
• It also decides on the rules for grants-in-aid to the states out of the Consolidated Fund of India

Source- Economic Times

14^th Finance Commission

• The 14th Finance Commission was set up on January 2, 2013. Headed by former Reserve Bank of India governor YV Reddy, its recommendations cover the period from April 1, 2015 to March 31, 2020
• It had stepped up the share of states in net central taxes to 42% from 32%