Article 243H of the Indian Constitution: Powers to impose taxes by, and Funds of, the Panchayats | Kanoon.site
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Article 243H of the Indian Constitution: Powers to impose taxes by, and Funds of, the Panchayats

Part: IX
Shorthand Notes: Panchayat Finance - State Legislature authorizes: Levy, Assignment, Grants, Funds

Article 243H is a crucial provision introduced by the 73rd Constitutional Amendment Act, 1992. It empowers the State Legislature to make laws that strengthen the financial position of Panchayats, thereby enabling them to function effectively as institutions of local self-government.

This article lays down the foundational framework for the financial autonomy and resource generation of Panchayats, allowing them to raise their own resources and receive financial assistance from the State Government.

Original Text

The Legislature of a State may,—

(a) authorize a Panchayat to levy, collect and appropriate such taxes, duties, tolls and fees in accordance with such procedure and subject to such limits as may be specified in the law;

(b) assign to a Panchayat such taxes, duties, tolls and fees levied and collected by the State Government for such purposes and subject to such conditions and limits as may be specified in a law;

(c) provide for making such grants-in-aid to the Panchayats from the Consolidated Fund of the State; and

(d) provide for constitution of such Funds for crediting all moneys received respectively by or on behalf of the Panchayats and also for the withdrawal of such moneys therefrom as may be specified in the law.

Detailed Explanation

Article 243H empowers the State Legislature to enact laws regarding the financial powers and resources of the Panchayats within its jurisdiction. It outlines four primary mechanisms through which the State can facilitate the financial functioning of these local bodies:

Clause (a) grants the State Legislature the authority to empower Panchayats to independently levy, collect, and appropriate certain taxes, duties, tolls, and fees. The specific types of taxes, the procedure for collection, and the limits on the amounts that can be levied are all determined by the law passed by the State Legislature. This provision is key to enabling Panchayats to generate their own revenue based on local needs and resources.

Clause (b) allows the State Legislature to provide for the assignment of certain taxes, duties, tolls, and fees that are levied and collected by the State Government, to the Panchayats. This means the State collects the revenue but earmarks and transfers it to the Panchayats. The purpose for which these funds can be used, along with any conditions and limits, are specified in the state law. This mechanism provides Panchayats with access to resources from the state’s overall revenue pool.

Clause (c) enables the State Legislature to make provisions for providing grants-in-aid to the Panchayats from the Consolidated Fund of the State. These grants are essentially financial assistance from the state government to supplement the resources of the Panchayats. The amount and conditions of these grants are determined by the state government, often based on the recommendations of the State Finance Commission established under Article 243I.

Clause (d) mandates the State Legislature to make provisions for the constitution of specific Funds for the Panchayats. These Funds are intended for consolidating all moneys received by or on behalf of the Panchayats. This includes their own collected revenues (from (a)), assigned state revenues (from (b)), grants-in-aid (from (c)), and any other receipts. The state law must also specify the procedures for the withdrawal of moneys from these Funds, ensuring financial accountability and orderly management of Panchayat finances.

In essence, Article 243H provides a flexible framework, allowing State Legislatures to tailor the financial powers and resources of Panchayats according to the specific conditions and needs of the state and its local bodies, thereby aiming to strengthen their financial viability and operational capacity.

Detailed Notes

  • Article 243H is part of Part IX of the Indian Constitution, introduced by the 73rd Amendment Act, 1992.
  • It deals with the financial powers and funds of Panchayats.
  • The article empowers the Legislature of a State to make laws concerning Panchayat finances.
  • It provides four main ways the State Legislature can strengthen Panchayat finances:
    • Authorization to Levy: The State Legislature can authorize Panchayats to levy, collect, and appropriate specific taxes, duties, tolls, and fees themselves (Clause a).
      • The specific items, procedures, and limits are defined by state law.
      • This enables Panchayats to generate their own revenue.
    • Assignment of State Collections: The State Legislature can assign to Panchayats taxes, duties, tolls, and fees that are actually levied and collected by the State Government (Clause b).
      • These assigned funds are for purposes and subject to conditions specified in state law.
      • This provides Panchayats with a share of state revenue.
    • Grants-in-aid: The State Legislature can provide for making grants-in-aid to Panchayats from the Consolidated Fund of the State (Clause c).
      • These are direct financial transfers from the state government.
      • Often based on recommendations of the State Finance Commission (under Article 243I).
    • Constitution of Funds: The State Legislature must provide for the constitution of Funds for Panchayats (Clause d).
      • All moneys received by or on behalf of Panchayats are credited to these Funds.
      • State law specifies how moneys can be withdrawn from these Funds.
      • This ensures proper management and accounting of Panchayat funds.
  • The operationalization of all these financial powers is dependent on laws enacted by the respective State Legislatures.
  • The article aims at enhancing the financial autonomy and resource base of Panchayats for effective local self-governance.

Additional Comments

  • Article 243H is crucial for the functional autonomy of Panchayats as it provides the legal basis for their financial resources.
  • The extent of financial empowerment of Panchayats varies from state to state, as it depends entirely on the laws passed by individual State Legislatures.
  • The recommendations of the State Finance Commission (constituted under Article 243I) play a significant role in determining the quantum of grants-in-aid and the assignment of state revenues under this article.
  • Effective implementation of this article requires political will at the state level to devolve adequate financial powers and resources to the Panchayats.
  • The constitution of separate Funds for Panchayats ensures transparency and accountability in the management of their finances.

Summary

Article 243H of the Indian Constitution empowers the State Legislature to enact laws concerning the financial aspects of Panchayats. It enables the State Legislature to authorize Panchayats to levy and collect their own taxes, duties, tolls, and fees. The article also allows the State Legislature to assign state-collected taxes to Panchayats and provide grants-in-aid from the State’s Consolidated Fund. Furthermore, it requires the State Legislature to make provisions for constituting Funds to manage all moneys received by Panchayats and regulate their withdrawal, thereby laying the groundwork for the financial viability and operational capacity of local self-governing bodies.
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