PUBLIC FINANCE
Since we are in the month of March, when all of us invariably pay our taxes and discuss the “Budget” by the Government, in this month I am dealing with the provisions of Public Finance under the Constitution.
A Government cannot exist without raising and spending money. However, it is the parliament that controls public finance which includes granting of money to the administration for expenses on public services, imposition of taxes and authorization of loans. The Indian Constitution sets out and elaborate mechanism for securing parliamentary control over finances.
The very first principle being, the relation between the Government and parliament in matters of finance. The executive cannot raise money by taxation, borrowing or otherwise, or spend money without the authority of parliament. The second principle being, that such power of raising money and expenditure is exclusively to the Loksabha, Rajyasabha can merely asset to it. The third principle being that, parliament cannot not vote money or decide expenses for any purpose except on demand by ministers. By the fourth principle, parliament cannot not impose any tax except upon the recommendation of the executive.
Article 265 states that, “No tax shall be levied or collected except by authority of law.” Article 265, protects the citizens from unlawful levy. A mere resolution of a House, is not sufficient to impose a tax. The legislature has to enact a law. Under Article 265, not only the levy, but also the collection of a tax must be sanctioned by law.
The second tenet of parliamentary control of finances is that money is granted by Loksabha only on demand by the executive. No proposal for imposing a tax or for appropriating public money be made without the recommendation of the government and sanction by the President. The reason for such a rule is that, if such power is given to individual member, there is a danger that they may suggest expenditure for the section of public they represent in the House, thus requiring the allocation of funds to be made on sectional rather than national basis. Since the government, both collects and spend the money it is in much better position to allocate the available resources on an planned national basis.
No expenditure can be incurred by the government without the sanction of parliament. Parliamentary control is ensured by rule that money cannot be withdrawn from the Consolidated Fund without and Appropriation Act. The Consolidated Fund is a single account for all government departments. It is a single fund in which all government receipts are deposited. In India the fund is found of all revenue receipts by the Central Government, all loans raised by it by issuing treasury bills, and any fees or other money taken by the Supreme Court. Thus, practically all moneys raised by the Central Government for its expenditure form part of the fund. Parliament is empowered to regulate by law such matters as the custody of the consolidated fund, payment of moneys therein and withdrawal of money there from.
And important mechanism for securing parliamentary control over appropriations is done on the principle of annuality, that means the appropriations are made by the parliament on an annual basis. The Government thus comes before the parliament every year to ask for grants for the ensuing year. The process to make annual appropriations passes through several stages. First and annual financial statements popularly known as budget is presented. It is the statement of the estimated receipts and expenditure of the government for the following year. The expenditure charged on the consolidated fund is shown separately from other expenditure.
Then comes the stage of submitting demands for grants to the Loksabha for approval. The estimates of expenditure charged on the consolidated fund are open to discussion but not to vote, all other items of expenditure contending in the budget are submitted in the form of demands for grants to the Loksabha. The Loksabha has power to assent, reject or reduce but not to increase the amount of any demand. A member can only move cut motion to reduce the amount of a demand however he can neither suggest any new expenditure nor proposed and increase in a demand over and about what the Government suggest. Cut motions are usually used as a devise to raise discussion on the conduct and policies of the executive and are seldom put to vote. The demands for grants are discussed in Rajyasabha but are not voted upon. It is the exclusive privilege of Loksabha to grant money demanded by the government.
As seen earlier, no money can be withdrawn from the consolidated fund without an Appropriation Act. The sanction given by Loksabha to the demands for grants does not by itself authorize expenditure without the passage of an Appropriation Act. Therefore, after the demands have been discuss and assented to in the Loksabha and Appropriation Bill is introduce in Loksabha. The bill provide for appropriation of all moneys required to meet the grants assented to by the Loksabha and the expenditure charged on the consolidated fund. The said amount in no case can exceed what is shown previously in the budget.
The last stage in the change of annual parliamentary financial procedure is reached when parliament enacts the Finance Act to effectuate Governments taxation proposal for the coming year. In India the taxes are partly permanent and partly temporary. Only a few taxes or an permanent basis. In order to maintain parliamentary control over the executive some important taxes are imposed on yearly basis for example the income tax. The Finance Act seeks to renew the annual taxes, impose new taxes. The passage of the Finance Act is essential to raise the necessary revenue because of Article 265.
However, each financial year is a water tight compartment and therefore just after a financial years ends and till new appropriation act is passed funds are needed to carry on the administration to overcome this situation the parliament allows a lum-sum amount to the government for a short period of 2 to 3 months so that the parliament may discuss the budget and pass the Appropriation Act.
Under the constitution the President appoints and Comptroller and Auditor – General. He has been prescribed two types of functions. As an accountant he compiles the accounts of the Union and the States. As an auditor, he audits all the receipts and expenditure of the Union and State Governments and ascertains whether moneys disbursed were leaded available for and applicable to the service or purpose to which they have been applied. Audit ensures that the executive keeps within the some allotted and purpose authorized. Audit is therefore directorate towards discovering waste and or extravagance. He secures the accountability of the executive to parliament in the field of financial administration. He submits his reports to the President or the Governor and these reports are then placed before the Parliament or the concerned state legislature. He thus satisfies himself on behalf of the parliament as to the wisdom and economy of the expenditure.
–Adv. Madhaveshwari Thube
