The State Government constituted a State Finance Commission vide its notification dated 15.9.94. The Commission submitted its Interim report in September, 1997 and final report on urban local bodies in Octorber, 98. The Commission submitted a report containing 76 recommendations of which the details of main recommendations are as under:

Professional Tax:
 

Previously Urban local bodies were not given share from the amount of professional tax collected from the area under jurisdiction of the local body. The commission recommended to give a share at the rate of 50 % from the amount reserved from respective area.(Rs.25 crores) The State Government has accepted this recommendation.

Entertainment Tax:
 

The State Government was disbursing 50% of the amount received as entertainment tax to the urban local bodies. The commission recommended to enhance this percentage to 75%.(Rs.31 crores to Rs.41.25 crores.) The State Government has accepted this recommendation.

Education Cess:
 

Education Cess is collected by urban local bodies on behalf of the State Government. Based on the percentages of recovery, the State Government was distributing this amount as grant to urban local bodies for maintenance of schools. The commission recommended to distribute entire amount recovered by the urban local bodies.(Rs.72 crores to Rs.86 crores.)The State Government has accepted this recommendation.

Surcharge on Stamp Duty:
 

The State Government has imposed surcharge at the rate of 25% of stamp duty. The commission recommended to give the amount of surcharge as grant to urban local bodies for their development works which is under cosideration.(Rs.22.08 )Municipal urban development fund (Rs.1 crores) Basic Capita grants, DA Grants to Municipal Employee(Rs.29.87 crores.)

The other grants:
 

The other grants such as Motor vehical tax is Rs.3.25 crores, seed capital Rs.12.34 crores,NA grants Rs.1.62 crores, NA tax 0.75, Land revenue Rs.5.51 ,local cess, 3.30 crores, Pay and allowances Rs.2.37 crores, District planning Rs,76.44,Per capitaRs,0.88 crores and Election Exp.Rs.0.81 totaling Rs.197.78 .