The Gujarat Fiscal Responsibility Act, 2005

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GOVERNMENT OF GUJARAT
LEGISLATIVE AND PARLIAMENTARY
AFFAIRS DEPARTMENT

THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005
(GUJARAT ACT NO. 11 OF 2005)

(As modified up to the 31st December, 2024.)

PRINTED IN INDIA BY THE MANAGER, GOVERNMENT CENTRAL PERSS,
GANDHINAGAR.
PUBLISHED BY THE DIRECTOR, GOVERNMENT PRINTING PUBLICATIONS
AND STATIONARY, GUJARAT STATE, GANDHINAGAR.
[2024]
[Price : `. 15]

GOVERNMENT OF GUJARAT
LEGISLATIVE AND PARLIAMENTARY
AFFAIRS DEPARTMENT

THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005
(GUJARAT ACT NO. 11 OF 2005)

(As modified up to the 31st December, 2024.)

PRINTED IN INDIA BY THE MANAGER, GOVERNMENT CENTRAL PERSS,
GANDHINAGAR.
PUBLISHED BY THE DIRECTOR, GOVERNMENT PRINTING PUBLICATIONS
AND STATIONARY, GUJARAT STATE, GANDHINAGAR.
[2024]
[Price : `. 15]
G.C.P.G.-H-113-06-2024-DTP-2

©
GOVERNMENT CENTRAL PRESS, GANDHINAGAR.
2005 : Guj.11 ] THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005. i
THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005.
CONTENTS.
PREAMBLE.

Sections. Page No.

1. Short title and commencement. 1
2. Definitions. 1
3. Fiscal Policy Statements. 2
4. Fiscal management principles. 3
5. Fiscal management targets. 3
6. Measures for fiscal transparency. 4
7. Measures to enforce compliance. 5
8. Power to make rules. 6
9. Protection of action taken in good faith. 6
10. Application of other laws not barred. 6
11. Power to remove difficulties. 6
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2 THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005 [ 2005 : Guj.11

2005 : Guj.11 ] THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005. 3

GUJARAT ACT NO. 11 OF 20051*
[THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005.]
Amended by Gujarat 16 of 2009. # [21st March, 2005.]
Amended by Gujarat 1 of 2011. #
Amended by Gujarat 3 of 2021. #

AN ACT

to provide for the responsibility of the State Government to ensure prudence in
fiscal management and fiscal stability by progressive elimination of revenue
deficit, sustainable debt management consistent with fiscal stability, greater
transparency in fiscal operations of the Government and conduct of fiscal
policy in a medium term fiscal framework and for matters connected therewith
or incidental thereto.

It is hereby enacted in the Fifty -sixth Year of the Republic of India as
follows:-

1. (1) This Act may be called the Gu jarat Fiscal Responsibility Act,
2005.
(2) It shall come into force on such date as the State Government
may, by notification in the Official Gazette, appoint.
Short title and
commencement.
2. In this Act, unless the context otherwise requires,- Definitions.
(a) "budget" means the annual financial statement to be laid before
the State Legislature under clause (1) of article 202 of the Constitution of
India;

(b) "current year" means the year preceding the year for which
budget is being presented;

(c) "fiscal deficit" means the excess of total disbursements from the
Consolidated Fund of the State (excluding repayment of debt ) over total
receipt into the Fund (excluding the debt receipts), during a financial year;

(d) "fiscal indicators" means the measures such as numerical ceilings
and proportions to gross State domestic product, as may be prescribed, for
evaluation of the fiscal position of the State Government;

(e) "prescribed" means prescribed by rules made under this Act;
(f) "previous year" means the year preceding the current year;
(g) "revenue deficit" means difference between revenue expenditure
and revenue receipts which indicates increase in liability of the State
Government without corresponding increase in assets of the Government;

(h) "State Government" means the State Government of Gujarat;

(i) "total liabilities" means the liabilities under th e Consolidated
Fund of the State of Gujarat and the public account of the State;

1. For Statement of Objects and Reasons, see Gujarat Government Gazette
Extraodinary, Part V, dated the 17th February, 2005, Page No. 11-8 to 11-9.
* This Act was assented by the Governor on the 21st March, 2005.
# This Amendment Act was deemed to have come into force on the 12 th January,
2021.

2 THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005 [ 2005 : Guj.11
(j) "triggers" means intra-year benchmark on deficit.
Fiscal
Policy
Statements.
3. (1) The State Government shall lay, i n every financial year, before
State Legislature, the Medium Term Fiscal Policy Statement and the
Fiscal Policy Strategy Statement alongwith the budget.

(2) The Medium Term Fiscal Policy Statement and the Fiscal Policy
Strategy Statement shall set forth the fiscal objectives, strategic priorities
of the State Government and a three years rolling target for fiscal
management laid down in section 5 with enunciation of underlying
assumptions.

(3) In particular, and without prejudice to the provisions con tained
in sub-section (2), the medium term fiscal policy statement shall include
assessment of sustainability relating to,-

(a) the balance between revenue receipt and the revenue
expenditure;

(b) the use of capital receipts including open market borrowings
for generating productive assets; and

(c) the estimated yearly pension liabilities worked out on
actuarial basis, for the next ten years, within such period as the State
Government may, by order, specify.

(4) The Fiscal Policy Strategy Statement shall, inter-alia, contain-
(i) The policies of the State Government for the ensuing
financial year relating to taxation, expenditure, borrowings (including
the borrowings by Public Sector Undertakings and special purpose
vehicles and other equivalent instrume nts where liability for
repayment is on the State Government, with ceiling fixed for each
agency) and other liabilities, lending and investments, pricing of
administered goods and services and description of other activities
such as guarantees and the acti vities of the public sector undertakings
which have potential budgetary implications and the key fiscal
measures and targets pertaining to each of these;

(ii) the strategic priorities of the State Government in the fiscal
areas for the ensuing financial year;

(iii) key fiscal measures and their rationale for any major deviation
in fiscal measures pertaining to taxation, subsidy, expenditure,
administered pricing and borrowings;

(iv) evaluation as to how the current policies of the State
Government are in conformity with the fiscal management principles
as set out in section 4 and the objectives set out in Medium Term
Fiscal Policy Statement;

(v) evaluation of the performance of the fiscal indicators
presented in the previous year vis-a-vis the targets set out earlier and
the likely performance in the current year.

(5) The Medium Term Fiscal Policy Statement and the Fiscal Policy
Strategy Statement referred to in sub -section (1) shall be in such form as
may be prescribed.

2005 : Guj.11 ] THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005. 3
4. (1) The State Government shall take appropriate measures to reduce
the revenue deficit and contain the fiscal deficit and thereby build up an
adequate revenue surplus by following the principles laid down in sub-
section (3).
Fiscal
management
principles.
(2) The revenue surplus as aforesaid may be utilised for discharging
liabilities of the State.

(3) The State Government shall be guided by the following fiscal
management principles, namely:-

(i) transparency in setting the fiscal policy objectives, the
implementation of public policy and in the publication of public accounts;
(ii) stability in fiscal policy making process;
(iii) responsibility in the management of public finances;
(iv) fairness in policy decisions of the State Government
having due regard to the financial implications on future generation;
(v) efficiency in design and implementation of th e fiscal
policy and managing the public sector;
(vi) to maintain Government debt at prudent level;
(vii) to manage guarantees and other co ntingent liabilities
prudently, with particular reference t o the quality and level of such
liabilities;
(viii) to maintain the integrity of the tax system by
minimizing
special incentives, concessions and exemptions;
(ix) to pursue non-tax revenue policies with due regard to cost
recovery and equity;
(x) to pursue expenditure policies that would provide impetus
to economic growth, poverty red uction and promotion of welfare of the
people;
(xi) to ensure that State Governme nt uses resources in such a
way that give best value for mon ey and also ensure that public assets are
put to the best possible use;
(xii) to minimize fiscal risks associated with running of public
sector undertakings and utilizes it for providing public goods and services;
(xiii) to formulate budget to realistic and o bjective manner
with due regard to the general economic outlook and revenue prospects
and to minimize deviations during the course of the year.

1[5. In particular, and without prejudice to the generality of the foregoing
provisions, the State Government shall-
Fiscal
management
targets.
(a) reduce the revenue deficit to zero by the financial year, commencing
from the 1 st April, 2011 and ending on the 31 st March, 2012 and maintain
at that level or generate revenue surplus thereafter;

1. Section 5 was substituted by Guj. 1 of 2011, s.2.
4 THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005. [ 2005 : Guj.11
(b) reduce fiscal deficit to not more than three per cent. of the
estimated Gross State Domestic Product of the year, from the financial
year commencing from the 1 st April, 2011 and ending on the 31 st March,
2012 and maintain at that level thereafter:

1[Provided that, for the financial year 2020 -21, additional fiscal deficit
of 2 per cent. over and above 3 per cent. of Gross State Domestic Product
(up to 5 per cent.) shall be permissible];

(c) cap the total pu blic debt of the State Government so as not to
exceed 27.1 per cent. of the estimated Gross State Domestic Product of the
year, for each of the financial years commencing from the 1 st April, 2011
and ending on the 31st March, 2015;

(d) cap outstanding g uarantees within the limit provided in the
Gujarat State Guarantees Act, 1963:
Guj. XXII of
1963.
Provided that revenue deficit and fiscal deficit may exceed the limits
specified under this section due to ground or grounds of unforeseen
demands on the fi nances of the State Government arising out of internal
disturbance or natural calamity or due to any other exceptional ground as
the State Government may specify:

Provided further that a statement in respect of the ground or grounds
specified in the fi rst proviso shall be placed before the State Legislature,
as soon as may be, after such deficit amount exceeds the aforesaid targets.]

Measures for
fiscal
transparency.
6. (1) The State Government shall take suitable measures to ensure
greater transparen cy in its fiscal operations in the public interest and
minimize, as far as practicable, secrecy in the preparation of the budget
and the demands for grants:

Provided that the State Government shall have the power to reserve
any such information, which w ould adversely affect the interest of the
State Ex-chequer.

(2) In particular, and without prejudice to the generality of the
foregoing provisions, the State Government shall, at the time of
presentation of the budget, disclose in a statement in the fo rm as may be
prescribed,-

(i) the significant changes in the accounting standards, policies
and practices affecting or like ly to affect the computation of fiscal
indicators;
(ii) the contingent liabilities created by way of guarantees, actual
liabilities arising out of borrowings by Public Sector Undertakings and
Special Purpose Vehicles and other equivalent instruments where
liabilities for repayment is on the State Government having re gard to the
potential budgetary implications, off -budget borrow ings, if any, and the
committed liability in respect of major works and supply contracts;
1. This proviso was inserted by Guj. 3 of 2021, s.2.

2005 : Guj.11 ] THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005. 5
(iii) revenue demands raised but not realized; and
(iv) the estimated yearly pension liabilities worked out on actual
basis, for the next ten year, within such period as the State Government
may, by order, specify.
7. (1) The budget presented and the policies announced at the time of
the budget shall be consistent with the objectives of the Medium Term
Fiscal Policy Statement and the Fiscal Policy Strategy Statement and the
Fiscal Management Targets.
Measures to
enforce
compliance.

(2) Triggers as well as corrective actions that shall be initiated upon
activation of triggers shall also be the integral part of the budget.

(3) The Finance Minister of the State shall review the trends in
receipts and expenditure in relation to the budget and mentioned the
remedial measures required to be taken to achieve the budget targets. The
report of such review shall be pla ced before the State Legislature during
the session immediately following the end of the second quarter of the
financial year.

(4) The review report, referred in sub-section (3) shall explain,
(i) any deviation or likely deviation in meeting the obl igations
cast on the State Government under this Act;
(ii) whether such deviation is substa ntial and relates to the
actual or the potential budgetary outcomes, and how much of the
deviation can be attributed to general economic environment and to
policy changes by the Government;
(iii) the remedial measures, the State Government proposes to take;
(iv) whenever there is a prospect of either shortfall in revenue
or excess of expenditure over the budgetary provis ions for a given year
on account of any n ew pol icy decision of the State Government that
affects either the Government or public sector undertakings, the
Government, prior to taking such policy decisions, shall take measures to
fully offset the fiscal impact for the current and future years by curtailing
the sums authorised to be paid and applied from and out of the
Consolidated Fund of the State u nder any Act to provide for the
appropriations of such sums or by taking interim measures for revenue
augmentation, or by taking up a combination of both:

Provided that nothing in this sub -section shall apply to the expenditure
charged on the Consolidated Fund of the State under clause (3) of article
202 of the Constitution of India;

(v) In case the revenue deficit and f iscal deficit exceed on
account of unforeseen demands on the finances of the Government, the
Government shall identify the net fiscal cost of the calamity and such cost
would provide ceiling for extent of non-compliance to the specified limits;
(vi) Whenever, one or more supplementary estim ates are
presented in the State Legislature, the State Government shall also present
an accompanying stateme nt indicating the corresponding curtailment of
expenditure and a ugmentation of revenue to fully offset the fiscal impact

6 THE GUJARAT FISCAL RESPONSIBILITY ACT, 2005. [ 2005 : Guj.11
of the supplementary esti mates in relation to the budget targe ts of the
current year and the objectives of the Medium Term Fiscal Policy
Statement, Fiscal Policy Strategy Statement and the Fiscal Managem ent
Targets for the future year.
Power to
make rules.
8.(1) The State Govern ment may, by notification in the Official
Gazette, make rules for carrying out the purposes of this Act.

(2) In particular, and without prejudice to the generali ty of the
foregoing power, such rules may provide for all or any of the following
matters, namely:-

(a) the measures of evaluation of Fiscal position of the
State Government;
(b) the form of Medium Term Fiscal Policy Statement
and Fiscal Policy Strategic Statement under sub-section (5) of section 3;
(c) the form in which disclosures shall be made under
sub-section (2) of section 6; and
(d) any other matter which is required to be, or may be
prescribed.

(3) All rules made under this section shall b e laid for not less than
thirty days before the State Legislature as soon as may be after they are
made, and shall be subject to rescission by the State Legis lature or to such
modifications as the Legislature may make during the session in which
they are so laid or the session immediately following.

(4) Any rescission or modification so made by the State Legislature
shall be published in the Official Gazette and shall thereupon take effect.

Protection of
action taken
in good faith.
9. No suit, prosecution or other legal proceedings shall lie against the
State Government or any officer of the Gov ernment for anything which is
in good faith done or intended to be done u nder this Act or the rules made
thereunder.

Application of
other laws not
barred.
10. The provisions of this Act shall be in addition to and not in
derogation of, the provisions of any other law for the time being in force.

Power to
remove
difficulties.
11. (1) If any difficulty arises in giving effect to the provisions of this
Act, the State Government may, by order published in the Official Gazette,
make such provisions, not inco nsistent with the provisions of this Act, as
may appear to be necessary for removing the difficulty:

Provided that no such order shall be made after the expiry of a
period of two years from the commencement of this Act.

(2) Every order made under thi s section shall be laid, as soon as
may be after it is made, before the State Legislature.

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GOVERNMENT CENTRAL PRESS, GANDHINAGAR.

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