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17th, December, 2021

6th State Finance Commission recommends to extend its term upto 31 October, 2022.

A state finance commission examines the financial position of panchayats in a state and makes recommendations to the governor.
The drafters of the Indian Constitution envisioned a two-tier democratic system with a strong central federal government and states like its units.
They also clearly demarcated the duties and responsibilities of the Union government and the states and further assigned revenue streams to both of them to discharge their duties and responsibilities.
However, that model went through a major change four decades after the Constitution came into force.
The 73rd Constitutional Amendment Act of 1992 formally recognized a three-tier system of local self-government consisting of organs at the level of villages, blocks and districts.
For example, the Gram Panchayats have existed throughout the country for thousands of years as a self-management unit.
However, the 73rd amendment gave the Gram Panchayats a real boost by giving them constitutional status, giving them funds, functions and public servants.

Under Article 243-I of the Indian Constitution, the governor of a state is required to set up a finance commission every five years.

It is to decide upon the allocation of resources between the state government and the Panchayati Raj institutions.
Article 243-Y also brought city councils or municipalities under the purview of the State Finance Commission.

A State Finance Commission has functions similar to that of the Central Finance Commission.
It allocates resources of a state to its Panchayati Raj institutions at all three levels in terms of taxes, duties and levies to be collected by the state and the local bodies.
Its job is similar to that of the Central Finance Commission constituted by the President of India under Article 280 of the Constitution, that divides the central taxes between the Union government and state governments.

A State Finance Commission reviews the financial position of the panchayats in a state and makes recommendations to the Governor about the principles that should govern the distribution of tax proceeds – taxes, duties, levies, toll fee collected by the state between the state and its Panchayati Raj Institutions at all three levels – village level, block level and district level.