State Finance Commission is constituted under clause (1) of Article 243-I of the Constitution of India and section 186 of the Kerala Panchayat Raj Act, 1994(13 of 1994), read with clause (1) of Article 243-Y of the Constitution of India and section 205 of the Kerala Muncipality Act, 1994 (20 of 1994). The Commission has the mandate review the financial position of the Panchayats and Muncipalities and make recommendations as to-
The Principles which should govern:
- The distribution between the State, Panchayats and Muncipalities of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under Part IX and Part IX-A of the Constitution and the allocation between the Panchayats at all levels and the Muncipalities of their respective shares of such proceeds.
- The determination of the taxes, duties, tolls and fees which may be assigned to or appropriated by the Panchayats and the Muncipalities.
- The grants-in-aid to the panchayats and the Muncipalities from the Consolidated Fund of the State.
The Commission shall also suggest measures needed to strengthen the financial position of Panchayats and Muncipalities with special reference to-
- The potential for Local Governments to raise funds from financial institutions and the market, and to suggest a framework for realising this potential.
- Improving the quality of upkeep of assets owned by Local Governments as well as those transferred to Local Governments.
- Rationalizing of taxes and revenues now collected by Local Governments.
- Achieving economy and efficiency in expenditure by Local Governments.
- Providing incentives for higher own resource mobilization by the Local Governments.
- Maintaining a proper fiscal data base relating to Local Governments.
- Putting in place measures required for improving the capacity of financial management by Local Governments.
- Improving monitoring of the fiscal performance of the Local Governments.