N. K. Singh to Head the 15th Finance Commission

15^th Finance Commission setting up has been approved by the Union Cabinet chaired by the Prime Minister Narendra Modi on November 22, 2017. It will assess the tax resources of the country and suggest a formula for their devolution among states for the five years commencing April 1, 2020 and to review the levels of fiscal deficit, among other issues. Under Article 280 (1) of the Constitution, it is a Constitutional obligation. The 15^th Finance Commission would be headed by former Secretary to the Govt. of India N. K. Singh and the panel will include Shaktikanta Das, former Economic Affairs Secretary and Anoop Singh, adjunct professor at Georgetown University. Dr. Ashok Lahiri, Chairman (non-executive, part time), Bandhan Bank and Dr. Ramesh Chand, Member, NITI Aayog shall be the part time members of the Commission and Arvind Mehta shall be the Secretary to the Commission.

• Article 280 of the Constitution of India 1949 requires setting up of a Finance Commission within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year, or at an earlier time as the President deems necessary.
• Finance Commission has the primary duty to make recommendations to the President as to:
  • the distribution between the Union and the States of the net proceeds of taxes which are to be, or may be, divided between them under this Chapter and the allocation between the States of the respective shares of such proceeds;
  • the principles which should govern the grants in aid of the revenues of the States out of the Consolidated Fund of India;
  • any other matter referred to the Commission by the President in the interests of sound finance
• Finance Commission shall determine their procedure and shall have such powers in the performance of their functions as Parliament may by law confer on them.
• 15^th Finance Commission’s recommendations:
  • are supposed to be in place before April 1, 2020; and
  • Cover the period from April 1, 2020 to March 31, 2025.
• 15^th Finance Commission is the first after roll out of Goods and Services Tax in July 2017; it will have to suggest changes in the devolution formula based on impact and experience of GST.

Finance commission has to take on itself the job of addressing the imbalances that often arise between the taxation powers and expenditure responsibilities of the centre and the states respectively. Primarily, it has to ensure a sense of equality in public services across the states.

Fourteen Finance Commissions have been constituted in the past.

The 14^th Finance Commission was set up on January 2, 2013. Former Governor of the Reserve Bank of India, Y.V. Reddy was its Chairman and it had submitted the Report on December 15, 2014. Its recommendations cover the period from April 1, 2015 to March 31, 2020. The key recommendation of the 14th Finance Commission was an increase in the share of states in the centre’s tax revenue from 32% to 42% per cent, which was indeed the single largest increase ever recommended by any Finance Commission.