Consider the following statements regarding the Finance Commission:

1. It is constituted under Article 280 of the Constitution.
2. It recommends the distribution of taxes between the Centre and the States.
3. Its recommendations are binding on the Government.

Which of the statements given above is/are correct?

Key Fact(s)

The Finance Commission is a constitutional body appointed by the President every five years or earlier if necessary. It recommends the distribution of the net proceeds of taxes between the Union and the States and among the States themselves. It also suggests principles governing grants-in-aid under Article 275. Over time, Finance Commissions have expanded their scope to include fiscal consolidation and local body grants. The recommendations of the Fifteenth Finance Commission covered the period 2021–26 and addressed issues like disaster risk management and defence funding. Although advisory, its recommendations carry significant weight in fiscal federalism.