Is a finance bill a money bill?

The recent article by P. Chidambaram titled ‘Across the aisle: Unconstitutional and unrealistic’ has caused a furore over the said legality of the Finance Bill presented by Nirmala Sitaraman on 5th July 2019.

The article penned by former finance minister points out several fallacies concerning Sitaraman’s maiden budget and even deemed the finance bill unconstitutional and the targets set in the budget unrealistic. Mr Chidambram claims that the budget does not chalk out a clear roadmap for the economy, and lacks structural reforms. He also added that there was no further relief to the middle class than what the Interim Budget had granted.

Calling the bill ‘constitutionally suspect’, Chidambaram added that a Money Bill must strictly comply with Article 110 of the Constitution. This interpretation of the money bill was re-asserted by Justice Puttuswamy in the Aadhaar Bill judgement. Chapter VI of the Finance Bill (2019) titled ‘Miscellaneous’ contains clauses that amend several Acts including the Securities Contracts (Regulation) Act, Reserve Bank of India Act, the Insurance Act, to name a few. While a finance bill is a money bill it should contain provisions that deal with taxes and the payments into or out of the Consolidated Fund of India (CFI) or the public account of India.

What is a Finance Bill?

A Finance Bill is introduced every year in Lok Sabha immediately after the Union Budget is presented. The bill or act will give effect to the financial proposals of the Government of India for the immediately following fiscal year.

Rule 219 of the Rules of Procedure of Lok Sabha defines a Finance Bill also to include a Bill that gives effect to supplementary (additional) financial proposals for any period. When these proposals are introduced to the parliament, it is termed a Finance Bill. Once passed by the parliament and assented to by the President, Finance Bill becomes the Finance Act for that year.

Is a finance bill a money bill?

A finance bill for all express purpose will be a Money Bill, but a Money Bill may not be a finance bill. A finance bill is accompanied by the budget as directed in Article 110 (a) of the Constitution of India. Apart from the provisions of a Money Bill, it must present detailed provisions on how it will be used and lays out the financial plan of the governments with its duties, among other things.

The constitution states that a Bill shall be deemed to be a Money Bill if it deals with the imposition, abolition, remission, alteration or regulation of any tax and any matter incidental to the consolidated fund of India. This may include payment of moneys withdrawal of moneys. A Money Bill, therefore, should only contain provisions that deal with taxes and the Consolidated Fund of India.

Can a Finance bill contain non-tax proposal?

Finance Bill/Act deals typically with income tax, customs, service tax, central excise, cess and related aspects and is intended to help implement the Budget.

Introducing amendments to the existing legislation is a very new practice. The Miscellaneous Chapter of the Finance Bill usually contains the following amendments. However, such changes are not always accepted by the parliament and the government may be forced to withdraw the bill.

In 2015, there was a significant uproar in the parliament concerning amendments that were proposed in the finance bill. The opposition demanded that it be withdrawn.

The Speaker of the house then, clarified that the primary object of a Finance Bill is to give effect to the financial proposals of the Government. The Rule does not rule out the possibility of inclusion of non-taxation proposals; therefore, a Finance Bill may contain non-taxation proposals also. However, including non-taxation proposal is not a common practice of Lok Sabha and should only be included if absolutely necessary.

Whether a finance bill can have non-tax proposals is a question which the parliament faces time and again. P Chidambaram’s concerns may be valid since the inclusion of non-taxation proposals in the Finance Bill, which is a primarily Money Bill, may curtail the power of Rajya Sabha to amend those provisions. However, whether such a Finance bill is unconstitutional or not is something the Supreme Courts will have to decide, if moved for clarity.