Know your budget: Terms to know before B-Day
The Budget is the most comprehensive report of the government’s finances in which revenues from all sources and outlays for all activities are consolidated. It also contains estimates of the government’s accounts for the next fiscal year.Updated: Jan 31, 2019 10:37 IST
Union minister Piyush Goyal will present the BJP-led National Democratic Alliance government’s last budget on February 1 before the Lok Sabha election scheduled to be held in April-May this year.
The Budget is the most comprehensive report of the government’s finances in which revenues from all sources and outlays for all activities are consolidated. It also contains estimates of the government’s accounts for the next fiscal year.
Also read: Interim budget 2019: All you need to know
Here are the terms you should know before Goyal presents the interim Budget:
Annual financial statement
It is a statement presented by the government of the estimated receipts and expenditure in respect of every financial year under Article 112 of the Constitution.
A white ten-page document, the annual financial statement is divided into three parts: consolidated fund, contingency fund and public account. The government has to present a statement of receipts and expenditure for each of these funds.
Direct and indirect taxes direct
Direct taxes are those that fall directly on individuals and corporations like income tax, corporate tax etc. Indirect taxes are imposed on goods and services and paid by consumers when they buy goods and services. These include excise duty, customs duty etc.
Goods and Services Tax
The Constitution defines GST as any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption.
“Goods” means every kind of movable property other than money and securities but includes the actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
“Services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
These are levies charged when goods are imported into, or exported from, the country, and they are paid by the importer or exporter. Usually, these are also passed on to the consumer.
It is the difference between all receipts and expenses in both revenue and capital account of the government. If the government’s revenue expenses exceed revenue receipts, it results in a revenue account deficit. Similarly, if the capital disbursements of the government exceed capital receipts, it leads to capital account deficit. Budgetary deficit is usually expressed as a percentage of GDP.
When the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit.
The primary deficit is the fiscal deficit minus interest payments. It tells how much of the government’s borrowings are going towards meeting expenses other than interest payments.
It is the government actions with respect to aggregate levels of revenue and spending. Fiscal policy is implemented through the budget and is the primary means by which the government can influence the economy.
This comprises actions taken by the Reserve Bank of India (RBI) to regulate the level of money or liquidity in the economy, or change interest rates.
A sustained increase in the general price level. The inflation rate is the percentage rate of change in the price level.
It consists of capital receipts and payments. It includes investments in shares, loans and advances granted by the Centre to state governments, government-held companies, corporations and other parties.
The revenue budget consists of revenue receipts of the government and it expenditure. Revenue receipts are divided into tax and non-tax revenue. Tax revenues constitute taxes like income tax, corporate tax, excise, customs, service and other duties that the government levies. The non-tax revenue sources include interest on loans, dividend on investments.
It is the difference between revenue expenditure and revenue receipt. It shows the shortfall of government’s current receipts over current expenditure.
Revenue expenditure is for the normal running of the government’s department and various services, interest charged on debt incurred by the government, subsidies, etc.
Revenue receipts consist of tax collected by the government and other receipts consisting of interest and dividend on investments made, fees and other receipts for services rendered by it.
The bill produced immediately after the presentation of the Union Budget detailing the Imposition, abolition, alteration or regulation of taxes proposed in the Budget.
It is a grant made in advance by Parliament, in respect of the estimated expenditure for a part of the new financial year, pending the completion of procedure relating to the voting on the Demand for Grants and the passing of the Appropriation Act.
If the total expenditure under a grant exceeds the provision allowed through its original Grant and Supplementary Grant, then, the excess requires regularisation by obtaining the Excess Grant from the Parliament under Article 115 of the Constitution. It will have to go through the process as in the case of the annual Budget, ie through a presentation of Demands for Grants and passing of Appropriation Bills.
Amount of money allocated in the Budget to any ministry or scheme for the coming financial year.
Revised estimates are the mid-year review of possible expenditure, taking into account the rest of expenditure, New Services and New instrument of Services etc. Revised estimates are not voted by Parliament, and hence by itself do not provide any authority for expenditure. Any additional projections made in the revised estimates need to be authorised for expenditure through the Parliament’s approval or by Re-appropriation order.
They allow the government to re-appropriate provisions from one sub-head to another within the same grant. Re-appropriation provisions may be sanctioned by a competent authority at any time before the close of the financial year to which such grant or appropriation relates. The comptroller and auditor general and the Public Accounts Committee reviews these re-appropriations and comments on them for taking corrective actions.
From the fiscal year 2006-07, every ministry presents a preliminary Outcome Budget to the ministry of finance, which is responsible for compiling them. The Outcome Budget is a progress card on what various ministries and departments have done with the outlays in the previous annual budget. It measures the development outcomes of all government programmes and whether the money has been spent for the purpose it was sanctioned including the outcome of the fund usage.
Parliament has very limited time for scrutinising the expenditure demands of all the ministries. So, once the prescribed period for the discussion on Demands for Grants is over, the Lok Sabha Speaker puts all the outstanding Demands for Grants, whether discussed or not, to the vote of the House. This process is popularly known as the guillotine.
Motions for reduction to various demands for grants are made in the Form of Cut Motions seeking to reduce the sums sought by the government on grounds of economy or difference of opinion on matters of policy or just in order to voice a grievance.
Consolidated Fund of India
All revenues raised, money borrowed and receipts from loans given by the government flow into it. All government expenditure other than certain exceptional items met from Contingency Fund and Public Account are made from this account. No money can be appropriated from the fund except in accordance with the law.
Contingency Fund of India
A fund placed at the disposal of the President to enable him/her to make advances to the government to meet urgent unforeseen expenditure.
Public account is used in relation to all the fund flows where the government is acting as a banker under provisions of Article 266(1) of the Constitution. Examples include provident funds and small savings. This money does not belong to the government and has to be returned to the depositors. The expenditure from this fund need not be approved by Parliament.
This is the tax paid by corporations or firms on the incomes they earn.
Minimum Alternative Tax (MAT)
MAT is a minimum tax that a company must pay, even if it is under zero tax limits.
It means the sale of shares of public sector undertakings by the government. The shares of government-held companies are earning assets at the disposal of the government. If these shares are sold to get cash, then earning assets are converted into cash, which is referred to as disinvestment.