CAG Audit of State Revenue

The Comptroller and Auditor-General of India (CAG) independently audits State government revenue to check whether money due to the government is properly assessed, collected and accounted for. Its constitutional mandate comes from Article 149, while the detailed duty to audit revenue receipts is prescribed by parliamentary law.

Constitutional foundation

The Constitution establishes the CAG as an independent authority and allows Parliament to define its audit responsibilities.

• Article 148 provides for the CAG’s appointment by the President and protects its independence through safeguards, including removal only in the same manner and on the same grounds as a Supreme Court judge.
• Article 149 requires the CAG to perform duties and exercise powers concerning Union and State accounts as prescribed by or under a law made by Parliament.
• The principal law implementing this mandate is the Comptroller and Auditor-General’s (Duties, Powers and Conditions of Service) Act, 1971.

What State revenue audit examines

Section 16 of the 1971 Act requires the CAG to audit all receipts payable into the Consolidated Fund of each State. Thus, its mandate covers revenue receipts, not merely government expenditure.

• The audit covers both tax and non-tax revenue payable into the State’s Consolidated Fund.
• The CAG examines whether rules and procedures are designed to secure an effective check on assessment, collection and proper allocation of revenue.
• It also examines whether those rules and procedures are actually being observed.
• This scrutiny can identify failures such as underassessment, short collection and deficiencies in revenue accounting or collection systems.

Access to records and legislative accountability

Section 18 of the 1971 Act gives the CAG powers to inspect relevant accounting offices, require accounts, books and papers, and seek information needed for its audit.

• Under Article 151(2), CAG reports relating to State accounts are submitted to the Governor, who must cause them to be laid before the State Legislature.
• Legislative scrutiny, particularly through the Public Accounts Committee, uses audit findings to hold the executive accountable for revenue administration.
• The CAG audits revenue administration; responsibility for assessing and collecting revenue remains with the State’s executive authorities.