The decisions, which follows the guidelines of the Supreme Court, were taken at a meeting chaired by Chief Minister Prithviraj Chavan.
The Commission would be headed by the Home Minister and comprise Leader of Opposition in the Legislative Assembly, Chief Secretary, Additional Chief Secretary (Home), Director General of Police and five non-official members.
SSC would dispense policy advice to the state government to enhance the working capacity of the police force, and would meet four times a year, officials said.
Accordingly, the Director General of Police and IG shall be selected by the state government from amongst three senior-most officers, they said.
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The committee also recommended a tenure of two years for the transfer of DGP, IG and other senior officers.
As per the decision approved by the Cabinet today, the Chief Minister will deal with the transfers of 223 IPS officers in the ranks of Commissioner, Additional Commissioner, IG, DCP and Superintendents of Police.
The Home Minister will now have the power to transfer 991 posts including that of Deputy SPs and Additional SPs.
The cabinet approved a "victim compensation" scheme, under which victims of crimes or their kin will get monetary compensation.
Accordingly, the kin of the deceased would get Rs two lakh, those suffering from a disability would get Rs 50,000 and victim of acid attack would get Rs three lakh.
The cabinet also approved undertaking of a survey to find the number of employed and unemployed persons in the state.
The cabinet also decided to revise the definition and responsibilities of "local cable operators" and "multi system operators" and make them jointly responsible for depositing the entertainment duty.
The cabinet also approved a grant of Rs 2.98 crore towards payment of wages for staff at the Children's Aid Society-run sssChildren's Home at Mankhurd here.