The Commission shall make recommendations relating to the following matters:-

1. The principles that should govern-
   1. The distribution between State and 3-tier Panchayati Raj Institutions and Urban Local Bodies of the net proceeds of taxes, duties, tolls and fees leviable by the State which may be divided amongst them under Part-IX and Part-IXA of the Constitution and the allocation between 3-tier Panchayati Raj Institutions and Urban Local Bodies of their respective shares of such proceeds;
   2. The determination of taxes, duties, tolls and fees which may be assigned to, or appropriated by 3-tier Panchayati Raj Institutions and Urban Local Bodies; and
   3. The Grants-in-aid to the 3-tier Panchayati Raj Institutions and Urban Local Bodies from the Consolidated Fund of the State;
2. The measures needed to improve the financial position of 3-tier Panchayati Raj Institutions and Urban Local Bodies;
3. Any other matter, which the Governor may refer to the Commission in the interest of sound finance of 3-tier Panchayati Raj Institutions and Urban Local Bodies.