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Question

Difficulty: EasyFiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure

Under Article 280 of the Constitution of India, which body is constituted by the President of India to recommend the distribution of net tax proceeds between the Union and the States?

  1. The Finance CommissionAnswer
  2. B
    The NITI Aayog
  3. C
    The Goods and Services Tax Council
  4. D
    The Reserve Bank of India

Answer

The Finance Commission is the constitutional body mandated under Article 280 of the Constitution of India.
Article 280 of the Constitution of India mandates the President to constitute a Finance Commission every five years. Its main duty is to recommend the distribution of divisible tax proceeds between the Union and the States (vertical devolution) and among the States (horizontal devolution).

Step-by-Step Solution

1
Identify the constitutional provisions governing Centre-State fiscal relations
Article 280 specifies the creation of a Finance Commission.
The Constitution requires an independent quasi-judicial body to recommend fair revenue sharing between the Union and the States.
2
Verify the role and appointing authority of the body
The President of India constitutes the Finance Commission every five years (or earlier).
This guarantees periodic review of vertical and horizontal fiscal imbalances in Indian public finance.

Key Concept

Constitutional provisions for public finance and revenue distribution in India (Article 280).
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Topics

Fiscal Policy, Union/State Budgeting, Public Finance, and Taxation Structure