As per Article 280 of the Constitution, the commission is required to make recommendations on the distribution of the net proceeds of taxes between the Centre and the states.
The commission also suggests the principles which should govern the grants in aid of the revenues of the states out of the consolidated fund of India.
Departing from the practice of giving a detailed set of considerations, the Centre has provided the commission a broad canvas and flexibility to define the scope of its work, approach and methodology.
The Centre has just mandated it to recommend measures needed to augment the consolidated fund of a state to supplement the resources of the panchayats and municipalities in the state and to review the present arrangement regarding financing of disaster management.
The commission, headed by economist Arvind Panagariya, at its first meeting in February discussed the terms of reference, while acknowledging the need for wide-ranging consultations with various stakeholders, including state governments, local bodies, Union ministries and experts.The commission will make its recommendations available by October 31, 2025, for a period of five years commencing April 1, 2026.