After Finance Commission nudge, all states but Arunachal form panels, Gujarat latest

News: The 15th Finance Commission has flagged the issue of delay over constituting state finance commission in its 2020 report. It noted that grants would not be released to states after March 2024, if they did not constitute the State Finance Commission. Consequently, all states, except Arunachal Pradesh, have set up State Finance Commissions.

1. Finance Commission of India: It is a constitutional body that is established under the provisions of Article 280 of the constitution.

2. It is set up to recommend the distribution of financial resources between the central and state governments of India.

3. It consists of a chairman and four other members appointed by the President of India.

4. It is not a permanent body and appointed by President of India every five year or earlier, if necessary.

5. Important functions of Finance Commission include recommending the distribution of net proceed of taxes between the center and the states, determining the principles governing the grants-in-aid to be given to states, making fiscal policy recommendations, suggesting measures needed to augment the consolidated fund of a state.

6. State Finance Commission: It is a constitutional body created by the 73rd and 74th Constitutional Amendment Acts.

7. Article 243-I provides for its constitution by the governor of the state after every five years.

8. It is set up to review the financial position of the panchayats and suggest principles which should govern the distribution between the state and the panchayats of the net proceed of taxes, duties and tolls and fees leviable by the state.