UPSC Prelims 2003 · General Studies

Question 73: Polity and Governance

Consider the following statements: The function(s) of the Finance Commission is/are

1.To allow the withdrawal of money out of the Consolidated Fund of India.
2.To allocate between the States the shares of proceeds of taxes.
3.To consider applications for grants-in-aid from States.
4.To supervise and report on whether the Union and State governments are levying taxes in accordance with the budgetary provisions.

Which of these statements is/are correct?

aOnly 1

b2 and 3

c3 and 4

d1, 2 and 4

AnswerThe answer is (b).

The Finance Commission (Article 280) recommends how the net proceeds of taxes are to be shared between the Union and the States and among the States, and the principles governing grants-in-aid to States from the Union (Article 275). It does not authorise withdrawals from the Consolidated Fund (Parliament does that through appropriation laws, with the CAG auditing) and it does not supervise whether governments levy taxes in line with the budget. So 2 and 3 are correct.

1. Withdrawals from the Consolidated Fund are authorised by Parliament through appropriation, not by the Finance Commission.
2. The Commission recommends the division of tax proceeds among the States.
3. It recommends the principles for grants-in-aid to States, as the key accepts.
4. It does not supervise or report on whether taxes are levied according to the budget.

Why each option is right or wrong

(a) Statement 1 is false: Parliament authorises withdrawals.
(b) Correct: statements 2 and 3.
(c) Statement 4 is false: the Commission does not supervise tax levies.
(d) Statements 1 and 4 are false.

Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2003, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.