Rule 42 — GAR
Original Rule Text
# 42. Inter-departmental adjustments
For purposes of inter-departmental payments, the departments of a Government shall be divided into service departments and commercial departments according to the following principies.
A. Service Departments: These are constituted for the discharge of those functions which either
(a) are inseparable from, and: form part of the idea of Govt or (b): are necessary to, and: form part of the general conduct of the business of Government. Examples of category (a): are:1 the departments of Administration of Justice, Defence, Jails, Medical, Police, Public Health, Education, Forest. Examples of category
(b) are: the departments of Survey of India, Printing and Stationery, Public Works (Building and Roads Branch), Central Purchase Organisation under Director General of Supplies and Disposal, New Delhi.
B. Commerical Departments or Undertakings: These are constituted mainly for purposes of rendering services or providing supplies, of certain special kinds, on payment for the services rendered or for the articles supplied. They perform functions which are not necessarily Government functions. They are required to work to a financial result determined through account maintained on commercial principles.
Government shall specify whether a particular department or particular activities of a department shall commercial department or undertaking.
What This Means
Rule 42 defines and distinguishes two fundamental types of government departments: Service Departments and Commercial Departments (or Undertakings). This classification is the foundation for understanding which departments should charge other departments for services and which should provide services freely as part of their normal government function.
Service Departments are those that exist to discharge core government functions — either functions that are inseparable from the idea of government itself (like courts, defence, jails, police, education, public health) or functions necessary for the general conduct of government business (like Survey of India, Government Printing, Public Works for buildings and roads, and the Central Purchase Organisation). These departments are not expected to be financially self-sustaining; their purpose is to deliver public services, not to generate income.
Commercial Departments or Undertakings are a different category. They exist primarily to render specific services or supply goods — functions that are not inherently governmental. They are expected to work to a financial result: to know whether they are making a profit or a loss, to justify their existence through commercial accountability. Examples would include government-owned factories, rail workshops that do commercial work, or government enterprises selling power or printing services. The critical accountability difference is that commercial departments maintain commercial accounts (as required by Rule 36) and are expected to charge and be charged for services, ensuring their financial viability is visible. Whether a specific department or specific activities within a department are classified as commercial is determined by Government.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- 1All government departments are classified as either Service Departments or Commercial Departments (Undertakings) for inter-departmental payment purposes.
- 2Service Departments exist for: (a) functions inseparable from government (courts, defence, police, education, medical, forest, jails) or (b) functions necessary for government's general conduct (Survey of India, Printing, PWD buildings and roads, Central Purchase Organisation).
- 3Commercial Departments/Undertakings provide specific services or supplies on payment; they perform functions not necessarily governmental; they must work to a financial result.
- 4Commercial Departments maintain separate commercial accounts (as required by Rule 36) and are subject to commercial accountability norms.
- 5Government specifies whether a particular department (or particular activities within a department) is a commercial department or undertaking.
- 6The classification directly determines whether inter-departmental charges apply — this flows through Rules 43 and 44.
Practical Example
The Ministry of Finance is reviewing the status of two organisations: the Central Government Health Scheme (CGHS) dispensaries and the Government of India Printing Press at Nashik.
For CGHS: it provides medical services primarily to Central Government employees — a function inseparable from the government's duty as an employer and consistent with the public health function. Under Rule 42, it falls squarely within Service Department category (b) — a function necessary for the general conduct of government business. It should not ordinarily charge other departments for serving their employees' medical needs.
For the Nashik Security Press: it prints currency notes, postal stamps, and passports — highly specialised services that involve generating an economically measurable output. It operates to a financial result, maintains separate commercial accounts, and charges customers (including the Reserve Bank of India, the Department of Posts, and the Ministry of External Affairs) for its services. Under Rule 42, it is a Commercial Department. Government has specified this through the India Security Press's own financial rules and regulations, which require it to operate on commercial principles and submit accounts in business format.
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.