Article 280

Article 280 of the Indian Constitution deals with the establishment of the Finance Commission. It is a constitutional body formed to recommend the distribution of tax revenues between the Union and the States, ensuring fiscal federalism.

Key provisions of Article 280 include: * Mandating the President to constitute a Finance Commission every five years or earlier. * The Commission consists of a chairman and four other members, all appointed by the President. * Outlining the duties of the Commission, including recommending the distribution of net proceeds of taxes between the Union and the States. * Determining the principles governing grants-in-aid to the States out of the Consolidated Fund of India.

• •Mandates the President to constitute a Finance Commission every five years.
• •Commission consists of a chairman and four other members appointed by the President.
• •Outlines the duties of the Commission, including recommending tax distribution.
• •Determines principles governing grants-in-aid to the States.

Article 280 is directly related to Article 281, which concerns the recommendations of the Finance Commission. Article 280 establishes the commission, while Article 281 deals with what happens to the recommendations made by the commission.

Article 280 has remained fundamentally the same since its inception. However, the focus and terms of reference of successive Finance Commissions have evolved to address changing economic realities and priorities. For example, recent commissions have focused on the impact of GST on state finances.

In the UPSC exam, questions about Article 280 frequently cover the composition, functions, and recommendations of the Finance Commission. Expect factual questions in Prelims and analytical questions in Mains, particularly related to fiscal federalism and resource distribution.

In practice, the Finance Commission is constituted by the President, and it gathers data, consults with various stakeholders (Union and State governments), and formulates recommendations on tax revenue distribution and grants-in-aid. These recommendations are then submitted to the President, who places them before Parliament.

Article 280 is significant because it ensures fair distribution of financial resources between the Union and the States, promoting fiscal federalism. This helps maintain cooperative federalism, where both the Union and the States can function effectively.

Challenges in implementation include balancing the needs of different states, addressing fiscal imbalances, and ensuring that recommendations are politically acceptable to both the Union and the States. The recommendations of the Finance Commission are generally accepted, but disagreements can arise.

Suggested reforms often include giving the Finance Commission more autonomy, expanding its scope to include local bodies, and making the recommendations more binding on the government. Some experts also suggest a permanent secretariat for the Commission.

Article 280 deals with fiscal federalism and tax revenue distribution based on constitutional principles. The Planning Commission (now NITI Aayog) was an extra-constitutional body that focused on planning and development. The Finance Commission's recommendations are generally binding, while the Planning Commission's plans were advisory.

A common misconception is that the Finance Commission decides on all financial matters between the Union and the States. In reality, it primarily focuses on tax revenue distribution and grants-in-aid, while other financial matters are handled through different mechanisms.

The future of Article 280 is likely to involve greater emphasis on addressing fiscal imbalances, promoting sustainable development, and adapting to changing economic landscapes, including the impact of digitalization and globalization on state finances. The terms of reference for future Finance Commissions will likely reflect these priorities.