Functions of the Finance Commission

The Finance Commission shall review the financial position of the Panchayats and Municipalities and make recommendations to the Governor— (A) in the case of Panchayats as to— (a) the principles which shall govern— (i) the distribution between the State and the Panchayats of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them and the allocation between the Panchayats at all levels of their respective shares of such proceeds ; (ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by the Panchayats ; and (iii) the grants-in-aid to the Panchayats from the Consolidated Fund of the State ; (b) the measures needed to improve the financial position of the Panchayats ; and (c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Panchayats ; (B) in respect of Municipalities as to— (a) the principles which shall govern— (i) the distribution between the State and the Municipalities of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Act and the allocation between the Municipalities at all levels of their respective shares of such proceeds; (ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by the Municipalities ; (iii) the grants-in-aid to the Municipalities from the Consolidated Fund of the State ; (b) the measures needed to improve the financial position of the Municipalities ; and (c) any other matter referred to the Finance Commission by the Governor in the interests of sound finance of the Municipalities.