Previous Year Question
Who amongst the following is responsible for revenue sharing between the State Government and the Local Government?
The Chief Minister
The Governor
State Finance Commission
None of the above
Correct Answer: C
Detailed Solution
The State Finance Commission recommends the principles governing revenue sharing between the State Government and Local Governments.
Under Article 243-I, the Governor constitutes a Finance Commission at the expiration of every fifth year to review the financial position of Panchayats. The Commission recommends to the Governor the principles governing the distribution of the net proceeds of taxes, duties, tolls and fees between the State and the Panchayats.
It also recommends which taxes, duties, tolls and fees may be assigned to or appropriated by Panchayats, the principles governing grants-in-aid from the Consolidated Fund of the State, and measures required to improve the financial position of Panchayats.
The distinction between the Governor and the State Finance Commission is important. The Governor constitutes the Commission, whereas the State Finance Commission makes recommendations regarding revenue sharing. Hence, the Governor is not the correct answer.
The same State Finance Commission also deals with Municipal finances. Under Article 243-Y, the Finance Commission constituted under Article 243-I reviews the financial position of Municipalities and recommends principles governing distribution of revenues between the State and Municipalities.
Thus, remember—
Governor → Constitutes State Finance Commission
State Finance Commission → Recommends revenue sharing between State and Local Bodies