The Twelfth Finance Commission of India was appointed on 1 November 2002 to make recommendations on the distribution of net proceeds of sharable taxes between union and states. The commission was headed by veteran economist of India, C. Rangarajan. The commission submitted its report on 30 November 2004 and covered the period from 2005-10.
The members of the Commission were:
- Dr. C. Rangarajan, Chair
- Shri T.R Prasad, IAS (retired)
- Prof. D.K Srivastava
- Shri Som Pal, Part time Member, resigned 14 May 2004
- Dr. Shankar N. Acharya, Part time Member, replacing Som Pal from 2 July 2004
Terms of Reference
The commission was asked to make recommendations on the following matters:
- The distribution of net proceed of taxes between union and states which are to be divided under chapter 1 part 12 of the constitution.
- The policies required to increase the consolidated fund of states on the basis of recommendation made by the finance commission of states to supplement the resources of municipalities and panchayats in the state.
In making the recommendation, the commission was asked to pay regard to
- The resources of the union government and state government for five years starting from 1 April 2005 on the basis of the total tax and non-tax that it will likely to receive by the end of 2003-04.
- The demand of the resources by the central government, in particular the need of expenditure on civil administration, internal security, defence, debt servicing and other committed expenditure and liabilities.