Need of an advanced budget

- Alive Correspondence   30-01-2017

          


The government’s plan to advance the Budget date to January instead of February-end helps it on a couple of counts. The first: it obviates the administrative need of presenting a Vote On Account to allow for government spending in the first few months of the financial year which  allows the government to draw funds from the Consolidated Fund of India for routine government expenditure till the Union Budget is approved by both the houses. The second: it facilitates more planned spending by various ministries and departments in the government during the first quarter. 
It is generally seen Government expenditure in the first quarter is generally slow. In fact, despite stringent guidelines on spending and reminders by the finance ministry, many ministries and departments bunch their expenditure in the second half, and more so in the last quarter of the financial year, lending themselves to criticism of inefficient spending.
 Parliament traditionally passes the budget through a two-stage process. A vote on account is passed in March to meet necessary expenses on employees’ salaries and other costs for two to three months and the finance bill, which contains tax changes, and the demands and appropriation bill, which spells out full year expenditure details, are passed in May.
 The advancing of the Budget date should, however, not be seen in isolation with the government also considering a change in the financial year. A committee under former Chief Economic Advisor Shankar Acharya was set up on July 6 to examine the desirability and feasibility of having a new financial year. It will examine the merits and demerits of various dates for the commencement of the financial year including the existing April 1-March 31.Two new financial year dates the committee may study are: one, the calendar year January 1-December 31 that aligns India with most countries and global financial institutions such as IMF and the World Bank, and two, October-September, because the government has a good idea of how the country’s principal monsoon season (South-West monsoon in June-September) has fared and its likely impact on agriculture. The committee is required to submit its report before December 31 this year.
Meanwhile, a Niti Aayog paper has noted that there is a need to change the financial year for better Budget planning, and has noted that January-December is most widely followed across countries and by UN bodies and also by 70 per cent of the top 50 Fortune 500 companies.
So, far the move to be much more than a mere statement of ‘change’, it must not only address the issue of immediate concern, that is, better expenditure planning, but also take into account the possibility of a change in the financial year currently being studied by the Shankar Acharya committee.As the government paves way for advancing the Budget presentation and getting the Finance Bill passed before March 31,a tax expert quoted:“Presenting the budget in January will give two months time to individuals and corporate to realigns their plans,” said Girish Vanvari, national head of tax at KPMG. Though the budget is presented in February, several tax proposals kick-in only from June after Parliament passes the annual finance bill in May. For instance, service tax was increased to 15% from 14% from June 1 this year, though the finance minister announced the change in the budget presented on February 28.
In the present scenario, people are also insulated against any tax changes for two months, till June. For instance, all your air travel, mobile services, movies, eating out and luxury cars got costlier from June 2016, which saved your bills for two months