Highlights

15th Finance Commission has finalised its report on fund devolution from the Centre to States 3 years after it was constituted. The Finance Commission has finalised the norms for 5 years counting from 2021-22 to 2025-26.

Points To Note

  • Finance Panel has constituted certain recommendations and it will submit the report to the President of India.
  • 15th Finance Commission report will be tabled by the Union Finance Minister in the Parliament stating what action has been taken on the recommendations.

Finance Commission Recommendations

  1. To create a separate defence and national security funds on the basis of centre’s suggestion.  However, this recommendations might mean a lower share of funds for states.
  2. It is also expected that the panel will factor in unpaid GST compensation dues to States for the year 2020. It would also work out on State’s revenue flow calculations for the years beyond 2022.

About Finance Commission

Finance Commission has been constitutionally created body that stands at the centre of fiscal federalism. It has been constituted as per Article 280 of the constitution of India as a quasi- judicial body. Finance commission is constituted by the President every five years as considered necessary by the President of India. Government of India set up first Finance Commission in 1951 and there have been 15th Finance Commission so far. GoI panel make recommendations on  the distribution of net proceeds of taxes between Centre – states and among states. The primary functions of the Finance Commission include:

  1. To evaluate finances of the Union and State Govts,
  2. To recommend on the sharing of taxes between Centre and States.
  3. To make principles for determining the distribution of taxes among States.

Fifteenth Finance Commission

On 27 November 2017, Fifteenth Finance Commission was constituted. It has been constituted in the backdrop of abolition of Planning Commission, distinction between Plan and non-Plan expenditure and introduction of the goods and services tax (GST). The Nand Kishore Singh panel had first submitted report in 2019 on the government’s requested just for the year 2020-21.

The 2019 report had reduced the State’s share of the divisible tax pool from 42 per cent, to 41 per cent. The panel had stated creation of the UT of Jammu & Kashmir and Ladakh as the reason for reduction.

It is a 5 member Commission. Nand Kishore Singh is the Chairman of Commission. Prof. (Dr.) Anoop Singh, Dr. Ashok Lahiri, Ajay Narayan Jha are member and Prof.Dr. Ramesh Chand part time member. 15th Finance Commission to submit its report 15th Finance Commission to submit its report