Union Territories & Panchayats
The same State Finance Commission set up under Article 243-I for Panchayats also reviews Municipalities' financial position and recommends state-Municipality revenue-sharing principles, tax assignment, and grants-in-aid - with the Governor required to lay its recommendations and an action-taken report before the State Legislature.
Rather than creating a separate finance commission just for cities, the Constitution has ONE State Finance Commission handle both Panchayats and Municipalities together, ensuring coordinated, consistent local-government revenue-sharing decisions across both rural and urban local bodies.
When a State Finance Commission issues its periodic report, it covers revenue-sharing recommendations for both the state's Panchayats and its Municipalities together, in a single coordinated review.