Q. With reference to the Finance Commission as mentioned in Article 280 of the Indian Constitution, consider the following statements:
1.It is a statutory body constituted by the President.
2.It recommends the distribution of net tax proceeds between the Centre and the States.
3.It suggests measures to augment the Consolidated Fund of States to support Panchayats and Municipalities.
Which of the statements given above are correct?
Quarterly-SFG-Jan-to-March
Red Book

[A] 1 and 2 only

[B] 2 only

[C] 2 and 3 only

[D] 1, 2 and 3 only

Answer: C
Notes:

Explanation:

  • The Finance Commission is a quasi-judicial body, not a statutory one. It is provided for in Article 280 of the Constitution. It is constituted by the President every five years or earlier.
  • One of the core functions of the Finance Commission is to recommend how the net proceeds of taxes should be distributed between the Centre and States, and among the States
  • Based on the recommendations of the State Finance Commissions, the Finance Commission suggests measures to augment the Consolidated Fund of the States to support Panchayats and Municipalities.

Source: Laxmikant

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