UPSC Prelims 2012 · Question 33 of 98

UPSC Prelims 2012 question on Thirteenth Finance Commission

Which of the following is/are among the noticeable features of the recommendations of the Thirteenth Finance Commission?

1. A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design.

2. A design for the creation of lakhs of jobs in consonance with India’s demographic dividend.

3. Devolution of a specified share of central taxes to local bodies as grants.

Select the correct answer using the codes given below.

  1. 1 only
  2. 2 and 3 only
  3. 1 and 3 only
  4. 1, 2 and 3
Show answer

Answer: C. 1 and 3 only

Verdict

Correct Answer: 1 and 3 only

Statements 1 and 3 are correct because the Thirteenth Finance Commission recommended a GST framework with compensation and grants for local bodies, while job creation design was not its mandate.

Analysis

The Thirteenth Finance Commission was constituted under Article 280 and chaired by Dr. Vijay Kelkar. Its recommendations focused on fiscal federalism, tax devolution, grants and fiscal consolidation.

Statement by statement

1. Design of Goods and Services Tax and a compensation package linked to adherence to the proposed design — Correct

The Thirteenth Finance Commission recommended a model framework for GST.

It also proposed a compensation package for states, linked to their acceptance and implementation of the recommended GST design.

2. Design for creation of lakhs of jobs in the next ten years — Incorrect

Job creation schemes are not the core mandate of the Finance Commission.

The Finance Commission mainly deals with tax devolution, grants-in-aid and fiscal relations between the Centre and States.

3. Devolution of a specified share of central taxes to local bodies as grants — Correct

The Commission recommended grants for local bodies such as Panchayats and Municipalities.

This aimed to provide more predictable financial support to local self-government institutions.

Extra UPSC info

* Finance Commission is constituted under Article 280 of the Constitution.

* The Thirteenth Finance Commission covered the period 2010–2015.

* It recommended increasing states’ share in central taxes to 32%.

* It emphasized fiscal consolidation and reduction of fiscal deficit.

* It recommended grants for local bodies and disaster relief.

* The Fourteenth Finance Commission later increased states’ share in central taxes to 42%.

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