GENERAL KNOWLEDGE

Detailed explanation-1: -Each Finance Commission is required to make recommendations on: (i) sharing of central taxes with states, (ii) distribution of central grants to states, (iii) measures to improve the finances of states to supplement the resources of panchayats and municipalities, and (iv) any other matter referred to it.

Detailed explanation-2: -The main key role of finance commission recommendations is to divide net proceeds of devisable taxes between the State and the Central government. and decide the principle for such allocation between two set of Government. They devised a flexible scheme for transfer of central revenue to the States.

Detailed explanation-3: -The role of the finance commission involves effective coordination with all levels of government to carry out the decision-making and thus strengthen the structure of fiscal federalism. The commission’s recommendations aim toward maintaining the balance in public spending between central and state governments.