Rule 40 — GAR
Original Rule Text
40. Adjustment between Governments:-
In the case of transactions between two Governments, adjustment shall always be made if required by or under the provisions of the Constitution; and otherwise, in such manner and: to such extent as may be mutually agreed upon by the Governments concerned.
NOTE 1:- In all cases of claims for an amount not exceeding Rs. 1000 in each case, for transactions on account of supplies made or: services rendered by one Government to another, no monetary claims will be resorted to. However, in respect of the: following daims monetary settlement should be made irrespective of the amount:-
( claims relating to commercial departments/undertakings of a Government which are required to work to a financial result, for services rendered or supplies made to or by them.
NOTE 2: -For: transaction above the lmmit of Rs. 1000 and where the: supplies/services are to be paid for irrespective of any monetary limit, the settlement will be made through cheques/ Bank drafts by the: supplied Government. The: procedure to be followed for making the monetary settlements in these cases, 0 between the State Governments inter se and
(i) in respect of supplies/service to a Central Government Department will be as indicated below:
- 0 Between the State Governments inter se:
The concerned officer of the Government in receipt of the supplies or: services will present a bill at: the Treasury for the cost of services or supplies alongwith the accepted invoice and a requisition for a bank draft in favour of the officer concerned in the supplying Government and remit the bank draft: so obtained to the latter who will present it at the Treasury for encashment and crediting to the proper head of account.
(i) Between a State Government and Central Government Department (including Defence, Railways, Postal and' Telecommuniattions Departments besides Civil).
The Department of the Central Government which received supplies/services will present a bill alongwith the: accepted invoice to its own. Accounts Officer concerned who will make the payment by cheques/bank drafts drawn in favour of the officer concerned of the supplying Government in settlement of its claims.
In the reverse case of supplies/services rendered by a Central Government Department the cheques/Bank drafts received by it from the supplied Government will be presented by it to its Accounts Officer for encashment and credit to: the proper head of Account. In case the departmental officer is himself in account with a branch of the bank, the cheque/draft will be remitted by him to the bank with challan showing particulars of the Head of account for credit to Government account.
What This Means
Rule 40 governs inter-governmental transactions — when one Government (Union or State) makes a payment or renders a service to another Government. The fundamental principle is that adjustment is mandatory where the Constitution requires it; in other cases, it is done as mutually agreed between the governments concerned.
For small amounts (not exceeding Rs. 1,000 per transaction), no monetary settlement is required at all — the cost is simply absorbed. However, there are exceptions: commercial departments that must work to a financial result must always settle, regardless of amount. For amounts above Rs. 1,000 (and where settlement is required regardless of amount), monetary settlement is made through cheques or bank drafts. When a State Government receives supplies or services from another State, its officer presents a bill at the Treasury for the cost along with the accepted invoice, obtains a bank draft in favour of the supplying State's officer, and remits it. When a Central Government department receives supplies or services from a State (or vice versa), the receiving Central department's Accounts Officer makes payment by cheque/draft drawn on the supplying State's officer. Reverse flows (Central to State) follow the mirror process.
The notes in the rule extend these procedures to Union Territory Governments and to inter-departmental transactions among Defence, Railways, Postal, Telecommunications, and Civil departments. They also carve out certain specific areas (customs duty on goods imported by various governments, and medical store depot supplies) where separate procedures will be prescribed by the relevant ministries.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1Inter-governmental adjustments are mandatory when required by the Constitution; in other cases, they follow mutual agreement between the governments.
- 2Transactions not exceeding Rs. 1,000 per case require no monetary settlement — no claim is raised. Exception: commercial departments must always settle regardless of amount.
- 3For amounts above Rs. 1,000, settlement is through cheques or bank drafts, not through book transfers.
- 4When a State receives services from another State, it obtains a bank draft from its Treasury and remits it to the supplying State's officer.
- 5Central Government departments receiving State supplies/services make payment by cheque/draft through their Accounts Officer.
- 6Union Territory Governments follow the same procedures as applicable.
- 7Inter-departmental transactions among Defence, Railways, Postal, Telecom, and Civil departments also follow these procedures.
Practical Example
The Rajasthan State Agriculture Department invites experts from the Himachal Pradesh Department of Horticulture to train its field officers on apple cultivation techniques over three days. The total cost of the visiting team (travel, per diem, and training fees) amounts to Rs. 85,000.
Since Rs. 85,000 exceeds the Rs. 1,000 monetary settlement threshold, Rajasthan must pay. The concerned officer in the Rajasthan Agriculture Department presents a bill at the State Treasury along with the accepted invoice from Himachal Pradesh, plus a requisition for a bank draft of Rs. 85,000 in favour of the relevant Himachal Pradesh officer. The Treasury provides the bank draft, which Rajasthan remits to HP. The HP officer presents the draft at the HP Treasury for encashment and credits the Rs. 85,000 to the appropriate receipt head in HP's accounts. Both states record the transaction correctly: HP shows a receipt of Rs. 85,000 under professional services, and Rajasthan shows an expenditure of Rs. 85,000 under training/capacity building.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
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This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.