| Which one of the following statements regarding the financial powers of municipalities |
| 1. The 74th Amendment Act provides for certain taxes, duties and tolls to be collected appropriated by municipalities. |
| 2. State Governments can give the powers to levy, collect and appropriate certain state taxes and duties to the municipalities. |
| 3. Financial position of municipalities is looked after by both the State Finance Commission and Union Finance Commission. |
| 4. A fund for the municipalities similar to the consolidated fund of a State or the union can be only by the State Government. |
| Select the correct answer using the codes given below. |
A) Only 1
B) 1 and 3
C) 2, 3 and 4
D) All of these
Correct Answer: C
Solution :
[c] The 74th Amendment Act does not give any taxation powers to the municipalities by itself but leaves it to the State Government to either provide for the powers to levy, collect and appropriate certain state taxes and duties or to assign certain state taxes and duties levied and collected by the State Government to the municipality. Thus, Statement 1 is incorrect while Statement 2 is correct. Statement 3 is also correct. The State Finance Commission Constituted under Article 243-Y looks after the financial position of municipalities and recommends for division between the states and municipalities of certain taxes and duties, determines the taxes and duties, which may be assigned by the State Governments to the municipalities, recommends measures to improve the financial position of municipalities etc. At the same time the Union Finance Commission also recommends measures to augment the consolidated fund of a state to supplement the resources of municipalities. Thus, Statement 3 is correct. Statement 4 is also correct and the power to constitute such a fund has been given by the Constitution to the State Government. The right answer is thus [c].
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