Think Learn & Perform (TLP)

The Only Dedicated Platform for UPSC Mains Answer Writing

Day 16 – Q 2. Examine the significance of Finance Commission in the post GST era.

2. Examine the significance of Finance Commission in the post GST era.  

जीएसटी युग के बाद वित्त आयोग के महत्व की जांच करें।


Article 280 of the constitution of India provides for financial commission as a quasi-judicial body. GST, as the second important financial amendment after LPG reforms, came into existence after hundred and first constitutional amendment.


Functions of finance commission

  • Setting up rules regarding the distribution of the tax revenues between the Centre and the states.
  • Determining the principles governing the allocation of Grants-in-Aid to the states and local bodies.
  • Determining the magnitude of Grants-in-Aid allocated to the states and local bodies.
  • Any other matter referred to the Commission

The significance of finance commission post GST – Fifteen finance commission, chaired by N K Singh, will be first finance commission after GST implementation.  The significance of it are as follows

  1. As GST has reduced the power of the state to levy tax over many areas, role of finance commission has increased in ensuring more devolution of funds to states
  2. Devolution of funds to local bodies need to be ensured
  3. While Article 269(1) provides GST council to share the net proceeds from interstate trade, article 270(1) and 270(2) provides that taxes will be levied under the manner prescribed by finance commission. Thus both article show contradiction between sharing of taxes between finance commission and GST council
  4. Payment of compensation for possible revenue loss for states for five years is to be calculated by finance commission
  5. Recommend payment based incentive to the states based on their efforts for promotion of ease of doing business.


Thus it can be said that it is going to be tough on financial commission which has to keep cooperative federalism, fiscal discipline and share responsibilities intact given  the sharing of power between GST council and finance commission is opaque.

Best answer –  Juhi Tomar

Print Friendly, PDF & Email