The report of the Thirteenth Finance commission which was submitted to the President recently by it chairman is an important document which is would have a momentous bearing on the budget next year. In this context it worth to have a look at the working of the finance commission.

Article 280 of the Constitution of India contains the relevant provision in regard to its constitution by the the President. Under its dispensation which comes in the form of recommendations on matters like efficient tax and expenditure management and the sharing of tax receipts between the Central and the State governments. Apart from that it also addresses the issue of laying down the formula or basis guiding the grants-in-aid from the Consolidated Fund of India and suggests measures towards improving the financial health of panchayats and local bodies like municipal bodies and corporations in close interactions with State Finance Commissions. Article 280 contains elaborate provisions regarding the qualifications and salaries etc. of the members of the commission. The recommendations of the Commission are executed through a presidential order. The first Finance Commission in Independent India was constituted in 1952 and K.C.Neogi was the first Chairman.

The report of the commission after being adopted by the Union cabinet is generally tabled in the budget session of Parliament. The task before the thirteenth Finance Commission was very significant in the sense that it was entrusted with the job of suggesting a new road map for fiscal consolidation and study the impact of the proposed goods and services tax (GST) which is due to come into effect in April this year.

It would be interesting to have a look at the statistical figures of the quantum of revenue share of all the states and Union territories. At present, the states and Union territories have a share of rupees 1.64 lakh crore which is almost 30 percent of the tax collected by the Centre and the total tax revenue has been estimated to be rupees 6,41,079 crore during the year 2009-2010.. The recommendations of the Commission would particularly important in the context of the ongoing in indirect and direct taxes which will have significant bearing on the quantum of collection of taxes.