Finance
The Committee felt themselves precluded from considering any modification of the proposals of the Joint Report for the separation of the finances of the Government of India and of Provincial Governments. No opinion is expressed on memoranda received at a late stage from Sir James Meston making proposals for substantial departure from the plan of dealing with provincial finance set forth in the Joint Report.
It may be recalled that Mr. Montagu and Lord Chelmsford proposed that, if the residue of the provincial revenues is not sufficient, it should be open to Ministers to suggest fresh taxation. The Committee take the view that when any new provincial tax or any proposed addition to an existing tax requires legislation to give effect to it, the decision whether that legislation should be undertaken must rest with the Governor and Ministers. Since the whole balance of the revenues of the province will be at the disposal of the Ministers for the administration of the transferred departments, the Committee consider that when an existing tax cannot be reduced or remitted without legislation, the decision whether legislation should be undertaken must also rest with the Governor and Ministers. To that extent taxation for provincial purposes should be regarded as a transferred subject.
The assessment or collection of the tax would be reserved or transferred, according as the agency employed belonged to a reserved or to a transferred department. The view is also taken that, when alterations in taxation can be effected without any change in the law, the decision whether any alteration should in fact be made must be recognized as resting with the Governor in Council if the department is reserved, and with the Governor and Ministers if it is transferred.
In respect to the powers of borrowing on the sole credit of provincial revenues which are to be conferred, the Committee propose that, if after joint deliberation there is a difference of opinion between the Executive Council and the Ministers, the final decision whether a loan should be raised and as to the amount of the loan must rest with the Governor.