FINANCE BILL - POLITY
News: Amid
protests, Finance Bill approved by both Houses
What's in the news?
● The
Government completed its Budgetary exercise for 2023-24, with both Houses of
Parliament approving the Finance Bill, 2023, along with a fresh amendment
introduced by Finance Minister Nirmala Sitharaman to rectify an error in the
Securities Transaction Tax (STT) rates on option contracts in the earlier
version of the Bill.
Budget in Parliament:
● The
Constitution refers to the budget as the 'annual
financial statement'.
● In
other words, the term 'budget' has nowhere been used in the Constitution. It is
the popular name for the annual financial statement that has been dealt with in
Article 112 of the Constitution.
● The
budget is a statement of the estimated receipts and expenditure of the
Government of India in a financial year, which begins on 1 April and ends on 31
March of the following year.
Other Elements of the Budget:
In
addition to the estimates of receipts and expenditure, the budget contains
certain other elements. Overall, the budget contains the following:
Constitutional Provisions:
The
Constitution of India contains the following provisions with regard to the
enactment of budget.
Article 112:
● The
President shall in respect of every financial year cause to be laid before both
the Houses of Parliament a statement of estimated receipts and expenditure of
the Government of India for that year.
Article 113:
● No
demand for a grant shall be made except on the recommendation of the President.
Article 114:
● No
money shall be withdrawn from the Consolidated Fund of India except under
appropriation made by law.
Article 117:
● No
money bill imposing tax shall be introduced in the Parliament except on the
recommendation of the President, and such a bill shall not be introduced in the
Rajya Sabha. Parliament (Lok sabha) can reduce or abolish a tax but cannot
increase it.
Article 265:
● No
tax shall be levied or collected except by authority of law.
Article 109:
The
Constitution has also defined the relative position of both the Houses of
Parliament with regard to the enactment of the budget in the following way.
● A
money bill or finance bill dealing with taxation cannot be introduced in the
Rajya Sabha. It must be introduced only
in the Lok Sabha.
● The
Rajya Sabha has no power to vote on the demand for grants; it is the exclusive
privilege of the Lok Sabha.
● The Rajya Sabha should return
the Money bill (or Finance bill) to the Lok Sabha within fourteen days.
The Lok Sabha can either accept or reject the recommendations made by Rajya
Sabha in this regard.
Charged Expenditure:
● The
estimates of expenditure embodied in the budget shall show separately the
expenditure charged on the Consolidated Fund of India and the expenditure made
from the Consolidated Fund of India (Article 112).
● The
budget shall distinguish expenditure on revenue account from other expenditure
(Article 112).
● The expenditure charged
on the Consolidated Fund of India shall not be submitted to the vote of
Parliament. However, it can be discussed by the
Parliament (Article 113).
○ The
budget consists of two types of expenditure-the expenditure 'charged' upon the
Consolidated Fund of India and the expenditure 'made' from the Con- solidated
Fund of India.
○ The
charged expenditure is non-votable by the Parliament, that is, it can only be
discussed by the Parliament, while the other type has to be voted by the
Parliament.
Stages in Enactment:
The
Budget goes through the following six stages in the Parliament:
1. Presentation of Budget:
● The
budget is presented in two parts - Railway Budget and General Budget. Both are
governed by the same procedure.
● The
Finance Minister presents the General Budget with a speech known as the 'budget
speech.
● At
the end of the speech in the Lok Sabha, the budget is laid before the Rajya
Sabha, which can only discuss it and has no power to vote on the demands for
grants.
2. General Discussion:
● The
general discussion on budget begins a few days after its presentation.
● It
takes place in both the Houses of Parliament and lasts usually for three to
four days.
● During
this stage, the Lok Sabha can discuss the budget as a whole or on any question
of principle involved therein but no cut motion can be moved nor can the budget
be submitted to the vote of the House.
● The
finance minister has a general right of reply at the end of the discussion.
3. Scrutiny by Departmental Committees:
● After
the general discussion on the budget is over the Houses are adjourned for about
three to four weeks.
● During
this gap period, the 24 departmental standing committees of Parliament examine
and discuss in detail the demands for grants of the concerned ministers and
prepare reports on them.
● These
reports are submitted to both the Houses of Parliament for consideration.
4. Voting on Demands for Grants:
● In
the light of the reports of the departmental standing committees, the Lok Sabha
takes up voting of demands for grants.
● The
demands are presented ministry wise.
● A
demand becomes a grant after it has been duly voted.
● Two
points should be noted in this context.
○ One,
the voting of demands for grants is the exclusive privilege of the Lok Sabha,
that is, the Rajya Sabha has no power of voting the demands.
○ Second,
the voting is confined to the votable part of the budget- the expenditure
charged on the Consolidated Fund of India is not submitted to the vote (it can
only be discussed).
5. Passing of Appropriation Bill:
● The
Constitution States that 'no money shall be withdrawn from Consolidated Fund of
India except under appropriation made by law.
● Accordingly,
an appropriation is introduced to provide for the appropriation, of the
Consolidated Fund of India, all money required to meet:
○ The grants voted by the
Lok Sabha.
○ The expenditure charged
on the Consolidated Fund of India.
● No
such amendment can be proposed to the Appropriation Bill in either house of the
Parliament that will have the effect of varying the amount or altering the
destination of any grant voted, or of varying the amount of any expenditure
charged on the Consolidated Fund of India.
● The
Appropriation Bill becomes the Appropriation Act after it is assented to by the
President.
● This
Act authorizes (or legalizes) the payments from the Consolidated Fund of India.
This means that the government cannot withdraw money from the Consolidated Fund
of India till the enactment of the Appropriation Bill.
● Vote on Account:
○ This
takes time and usually goes on till the end of April. But the government needs
money to carry on its normal activities after 31 March (the end of the
financial year). To overcome this functional difficulty, the Constitution has authorized
the Lok Sabha to make any grant in advance in respect to the estimated
expenditure for a part of the financial year, pending the completion of the
voting of the demands for grants and the enactment of the Appropriation Bill.
○ This
provision is known as the Vote on
Account. It is passed (or granted) after the general discussion on budget
is over.
○ It
is generally granted for two months
for an amount equivalent to one-sixth of the total estimation.
6. Passing of Finance Bill:
● The
Finance Bill is introduced to give effect to the financial proposals of the Government of India for the following year.
● It
is subjected to all the conditions applicable to a Money Bill. Unlike the Appropriation Bill, the
amendments (seeking to reject or reduce a tax) can be moved in the case of a
Finance Bill.
● According
to the Provisional Collection of Taxes Act of 1931, the Finance Bill must be
enacted (i.e.,passed by the Parliament and assented to by the president) within 75 days.
● The
Finance Act legalizes the income side of the budget and completes the process
of the enactment of the budget.