Government Finances - an overview
26 06 2015
Friday
THE annual accounts of the Union Government presented to the Parliament,consist of Finance Accounts and Appropriation Accounts. The Finance Accounts depict the statements of receipts into and payments from the Consolidated Fund, Contingency Fund and Public Account. The AppropriationAccounts depict expenditure compared with the amounts authorised by the Legislature and explanations for the resultant excesses/savings under eachgrant/appropriation.
Consolidated Fund:
All revenues received by the Union Government, all loans raised by issue of treasury bills, internal and external loans and all moneys received by the Government in repayment of loans shall form one Consolidated Fund titled the "Consolidated Fund of India" established under Article 266 (1) of the Constitution of India.
Contingency Fund:
The Contingency Fund of India established under Article 267 (1) of the Constitution is in the nature of an imprest placed at the disposal of the President to enable him/her to make advances to meet urgent unforeseen expenditure, pending authorisation by the Parliament. Approval of the Legislature for such expenditure and for withdrawal of an equivalent amount from the Consolidated Fund is subsequently obtained, whereupon the advances from the Contingency Fund are recouped to the Fund.
Public Account:
Besides the normal receipts and expenditure of Government, which relate to the Consolidated Fund, certain other transactions enter Government Accounts, in respect of which the Government acts more as a banker. Transactions relating to provident funds, small savings, other deposits, etc. are a few examples. The public moneys, thus, received are kept in the Public Account, set up under Article 266(2) of the Constitution and the connected disbursements are made therefrom.
Contingent Liabilities of the Union Government
In terms of Article 292 of the Constitution, the Union Government may give guarantees within such limits, if any, as may be fixed by Parliament by law. Guarantees are given by the Union Government for (i) repayment of borrowings and payment of interest thereon, (ii) repayment of share capital and payment of minimum dividend, (iii) payment against agreements for supplies of materials and equipment on credit basis, etc., on behalf of Government companies/corporations, Railways, Union Territories, State Government, localbodies, joint stock companies, co-operative institutions etc. These guarantees constitute a contingent liability on the CFI. The sums guaranteed outstanding as on 31 March 2014 was Rs. 2,49,503 crore.
Contingent liabilities of the Union Government arise because all risks cannot be anticipated upfront. While guarantees do not form part of debt as conventionally measured, in the eventuality of default, they have the potential of aggravating the debt position of the Government.
Types of Deficits:
(a) Revenue Deficit: Revenue deficit represents the difference between revenue expenditure and revenue receipts. Revenue deficit leads to increase in borrowings without corresponding capital/asset formation. Borrowings resorted to meet revenue deficit, therefore, do not have any asset back-up and create an asset liability mismatch. For these reasons, revenue deficit is considered generally less desirable.
(b) Fiscal Deficit: Fiscal deficit is the excess of actual expenditure over non-debt receipts. It also indicates the required borrowing of the Government and the increment to its outstanding debt. It normally represents the net incremental liabilities of the Government or its additional borrowings made to bridge the budgetary gap between revenue and expenditure. The shortfall can be met either by additional public debt (internal or external) or by the use of surplus funds from the Public.
(c) Primary Deficit: Primary deficit is measured by subtracting the interest payments from fiscal deficit. It is a measure of current year's fiscal operation after excluding the liability of interest payment created due to borrowings undertaken in the past.
Source: CAG's Reports
RBI extends the Date for Withdrawal of Pre-2005 Series Banknotes
THE Reserve Bank of India has extended the date for the public to exchange their pre-2005 banknotes till December 31, 2015. It had, in December 2014, set the last date for public to exchange these notes as June 30, 2015.
Soliciting cooperation from members of public in withdrawing these banknotes from circulation, the Reserve Bank of India has urged them to deposit the old design notes in their bank accounts or exchange them at a bank branch convenient to them.
The Reserve Bank has stated that the notes can be exchanged for their full value. It has also clarified that all such notes continue to remain legal tender.
Explaining the move, the Reserve Bank said that the banknotes in Mahatma Gandhi series have now been in circulation for a decade. A majority of the old banknotes have been withdrawn through bank branches. It has, therefore, decided to withdraw the remaining old design notes from circulation. Not having currency notes in multiple series in circulation at the same time is a standard international practice, the Reserve Bank has pointed out.
The Reserve Bank will continue to monitor and review the process so that the public is not inconvenienced in any manner.
RBI Press Release : 2014-2015/2751., Dated June 25 2015
No more meetings with Seventh Pay Commission
THE Seventh Central Pay Commission is close to finishing its task after elaborate discussions with all stakeholders. The Commission states, "valuable inputs have been received and the work of compilation and finalization of the report is underway, so that the Commission completes its task in the time frame given to it. Accordingly, any future requests for meeting with the Commission will not be entertained. "
The Commission met several associations and employees at Bangalore, Dehradun, Leh, Mumbai, Shimla, Hyderabad, Jodhpur, Kolkata, Port Blair, Shillong, Guwahati and of course Delhi.
SSI Units Eligible for Credit of Service Tax during exemption period?
CAN a small scale unit availing exemption under Notification No 8/2003 CE dated 1.3.2003 take CENVAT Credit on input services?
As per Notification No 8/2003 CE, the manufacturer shall not avail the credit of duty on inputs under rule 3 or rule 11 of the CENVAT Credit Rules, 2002 (herein after referred to as the said rules), paid on inputs used in the manufacture of the specified goods cleared for home consumption, the aggregate value of first clearances of which, as calculated in the manner specified in the said Table does not exceed rupees one hundred and fifty lakhs …
This notification bars taking of credit on inputs and not on input services. Does Rule 6 of the CENVAT Credit Rules apply?
This question was before the CESTAT way back in 2009 (2010-TIOL-200-CESTAT-AHM). The Tribunal observed,
1. This Rule comes into effect and can be applied only when the assessee is engaged in manufacture of dutiable and exempted goods or as provider of dutiable and exempted services.
2. In this case, Notification specifically provides for denial of credit of duty paid on inputs, but does not provide for denial of cenvat credit on input service.
3. It has to be noted that in respect of capital goods also, the credit is allowed even during the period of exemption to SSI Manufacturers and this is because Notification does not provide for denial of cenvat credit on capital goods.
4. Therefore, it is obvious that if the intention was to deny the benefit of cenvat credit of service tax paid on input services to the assessee availing SSI exemption, input services would have been specifically excluded, as in the case of inputs.
5. Since the Exemption Notification does not put such conditions, the appellants are eligible for the cenvat credit of service tax paid on inputs services.
The same issue came up again before the Tribunal. In this case the Commissioner had observed, "logically when credit is not available on inputs, it is not available on input services also under the Notification." The Tribunal Member observed, "I am not able to appreciate and understand from where the logic comes." And stay was granted. (2014-TIOL-3067-CESTAT-BANG ). Interestingly, it was the same Member in both the cases and in this case the party had not relied on the previous reported decision.
WCO Photo Competition 2015 - Thailand Entry
Until Monday with more DDT
Have a nice weekend.
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