Which of the following is/are among the noticeable features of the recommendations of the Thirteenth Finance Commission?
- 1.A design for the Goods and Services Tax, and a compensation package linked to adherence to the proposed design.
- 2.A design for the creation of lakhs of jobs in the next ten years in consonance with India’s demographic dividend.
- 3.Devolution of a specified share of central taxes to local bodies as grants.
Select the correct answer using the codes given below:
Answer & explanation
Answer: (c) 1 and 3 only
The Thirteenth Finance Commission proposed a model GST with a compensation fund tied to conditions. It also fixed grants to local bodies as a percentage of the divisible pool of central taxes. It gave no plan for creating lakhs of jobs, and mentioned the demographic dividend only as a reason to invest in human development. So statements 1 and 3 are correct.
- ✓ 1. Chapter 5 of the report designs a model GST and proposes a 'Grand Bargain' between the Centre and states. A GST Compensation Fund would pay states for revenue loss. The Centre's transfers to this fund are subject to specified conditionalities, so compensation is linked to adherence to the proposed design.
- ✗ 2. The report refers to the demographic dividend only as something to be harnessed through investment in human development, particularly education and public health. It has no recommendation designing the creation of lakhs of jobs over ten years.
- ✓ 3. Chapter 10 recommends grants to local bodies worked out as a percentage of the previous year's divisible pool of central taxes. The award comes to 2.28 per cent of the relevant divisible pool for 2009-14. So a specified share of central taxes flows to local bodies in the form of grants.
Remember · The Thirteenth Finance Commission (2010-15, chaired by Vijay Kelkar) proposed a GST design with a conditional compensation fund, and grants to local bodies at 2.28% of the divisible pool. It did not propose a jobs plan.
Sources
- Thirteenth Finance Commission Report, Chapter 5: Goods and Services Tax ↗ “The Central Government shall transfer to the GST Compensation Fund amounts as indicated in Table 5.2 and subject to the conditionalities indicated in paras 5.55 and 5.56.”
- Thirteenth Finance Commission Report (Vol. I), Chapter 10: Local Bodies ↗ “the proposal is to award 2.28 per cent of the relevant divisible pool (2009-14) as a grant to local bodies. … This is a one-time demographic dividend which needs to be harnessed through appropriate investments in human development, particularly in education and public health”
Question: UPSC Civil Services (Preliminary) 2012, General Studies Paper I. Explanation: Minimalist IAS, checked 25 Oct 2026 (how we verify). ·
