2019 – Posted in: Daily News – Tags: Article 280

FINANCE COMMISSION REPORT

For: Preliminary & Mains

Topics covered:

An interim report by Finance Commission for the FY 2020-21

News Flash

The 15th Finance Commission submitted its interim report on devolution formula for the financial year 2020-21 to President of India. The Commission headed by N K Singh.

Devolution Formula

The devolution formula spells out how the Centre plans to share the taxes collected by it with the States.
Since the formula is to be applied in the new Budget, the award has not been made public. However, it is believed that the devolution could be less than the 42 percent prescribed by the 14th Finance Commission.

Key Points

The 15th Finance Commission was constituted by the President of India under Article 280 of the Constitution in November 2017, to make recommendations for a period of five years from April 2020 to March 2025.
The term of the commission was originally set to end in October 2019, but was extended by one month to November 30.
The extension of the term was given to enable the commission to examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2026.
This has been necessitated after Article 370 of the Constitution was amended. Following this the State of Jammu & Kashmir was bifurcated into two Union Territories, Jammu & Kashmir and Ladakh.
Since the Finance Commission’s recommendation on devolution is meant only for the States and as Jammu & Kashmir ceased to be a State, there was a need to change the terms of reference.

Way ahead

The report will first be studied and then a final view will be taken by the Cabinet following which it will be tabled in Parliament just before the Union Budget next year.

15th Finance Commission

The Fifteenth Finance Commission was constituted by the government of India in November 2017 to give recommendations for devolution of taxes and other fiscal matters for five fiscal years, commencing 1 April 2020. The commission’s chairman is Nand Kishor Singh.
The commission was constituted after etting ceremonial approval from President of India.
In July 2019, the commission’s term was extended by a month to November 2019, and its terms of reference (ToR) were expanded by the Union Cabinet and asked it to consider whether “adequate, secure and non-lapsable” funds could be provided for funding defence and internal security, and how would a distinct system to fund defence and internal security be operationalised.
The Finance Commission was established by the President of India in 1951 under Article 280 of the Indian Constitution. It was formed to define the financial relations between the central government of India and the individual state governments.

Important Information

The last time an interim report was submitted was during the term of 11th Finance Commission (2000-05), when the new States of Jharkhand, Uttarakhand and Chhattisgarh were created.

Source: The Hindu Businessline