Paragraphs 4-7 of the Presidential Order dated 28th June,
1972, containing the Terms of Reference of the Sixth Finance
Commission are reproduced below:-
4. The Commission shall make recommendations as to be following
matters:-
(a) the distribution between the Union and the States of
the net proceeds of taxes which are to be, or may be, divided
between them under Chapter I of Part XII of the Constitution
and the allocation between the States of the respective
shares of such proceeds;
(b) the principles which should govern the grants-in-aid
of the revenues of States out of the Consolidated Fund of
India and the sums to be paid to the States which are in
need of assistance by way of grants-in-aid of their revenues
under Article 275 of Constitution for purposes other than
those specified in the provisos to clause (1) of that article
having regard, among other considerations, to:-
(i) the existing practice in regard to determination
and distribution of Central assistance for financing State
Plans;
(ii) the revenue resources of those States for the five
years ending with the financial year 1978-79 on the basis
of the levels of taxation likely to be reached at the
end of the financial year 1973-74;
(iii) the requirements on revenue account of those States
to meet the expenditure on administration taking also
into account such provision for emoluments of Government
employees, teachers and local body employees as obtaining
on a specified date as the Commission deem it proper in
the light of the States' capacity and needs, interest
charges in respect of their debt, transfer of funds to
local bodies and aided institutions and other committed
expenditure;
(iv) adequate maintenance and upkeep of the capital assets
and maintenance of Plan schemes completed by the end of
1973-74, the norms, if any, on the basis of which specified
amounts are allowed for the maintenance of different categories
of capital assets being indicated by the Commission;
(v) the requirements of States which are backward in
standards of general administration for upgrading the
administration with a view to bringing it to the levels
obtaining in the more advanced States over a period of
ten years; and
(vi) the scope for better fiscal management and economy
consistent with efficiency which may be effected by the
States in their administrative, maintenance, developmental
and other expenditure;
(c) the changes, if any, to be made in the principles governing
the distribution amongst the States of the grant to be made
available to the States in lieu of tax under the repealed
Railway Passenger Fares Tax Act, 1957;
(d) the changes, if any, to be made in the principles governing
the distribution amongst the States under Article 269 of
the Constitution of the net proceeds of any financial year
of estate duty in respect of property other than agricultural
land;
(e) the changes, if any, to be made in the principles governing
the distribution of the net proceeds in any financial year
of the additional excise duties leviable under the Additional
Duties of Excise (Goods of Special Importance) Act, 1957,
on each of the following commodities, namely:-
(i) cotton fabrics
(ii) woolen fabrics
(iii) rayon or artificial silk fabrics
(iv) sugar; and
(v) tobacco including manufactured tobacco, in replacement
of the States' sales taxes formerly levied by the State
Governments; Provided that the share accruing to each
State shall not be less than the revenue realised from
the levy of sales tax for the financial year 1956-57 in
that State; and
(f) the principles governing the distribution among the
States of the grant to be made available to the States on
account wealth tax on agricultural property.
5. The Commission may make an assessment of the non-plan
capital gap of the States on a uniform and comparable basis
for the five years ending with 1978-79. In the light of such
an assessment, the Commission may undertake a general review
of the States' debt position with particular reference to
the Central loans advanced to them and likely to be outstanding
as at the end of 1973-74 and suggest changes in the existing
terms of repayment having regard inter-alia to the overall
non-plan gap of the States, their relative postion and the
purposes for which the loans have been utilised, and the requirements
of the Centre.
6. The Commission may review the policy and arrangements
in regard to the financing of relief expenditure by the States
affected by natural calamities and examine inter-alia the
feasibility of establishing a National Fund to which the Central
and State Governments may contribute a percentage of their
revenue receipts.
7. The Commission in making its recommendations on the various
matters aforesaid shall have regard to the resources of the
Central Government and the demands thereon on account of the
expenditure on civil administration, defence and border security,
debt servicing and other committed expenditure or liabilities."
TERMS OF REFERENCE
OF THE SIXTH FINANCE COMMISSION