Govt favours a January budget, move will allow taxpayers plan betterbusiness Updated: Aug 22, 2016 06:47 IST
File photo of the Parliament building in New Delhi. If finalised, an early presentation of the annual budget will ensure its passage before fiscal year-end.
The government is looking to advance the budget presentation by a month to January from next year, a move that will allow individuals and companies more time to firm up savings and tax payout plans.
The budget is usually presented on the last working day of February, a month before the new financial year begins on April 1.
“No final decision has been taken so far, but the ministry is examining the idea to advance the date of presenting the budget,” said a finance ministry official who did not wish to be named.
The move will need bipartisan political support as it will involve advancing the Parliament’s budget session at least by a month.
The Congress was not in support of the plan.
“What is the logic behind changing a time-tested method? If the budget is presented in January, the finances of the country will not be clear by then,” said Veerappa Moily, the Congress’s Lok Sabha MP and a former law and corporate affairs minister.
A January budget would leave little time between Parliament’s winter session, which usually ends in the last week of December, and the budget session that begins in the third week of February.
“If the budget is presented in January, there will be overlap of the winter and budget sessions of Parliament. Parliamentary work will be hampered,” Communist Party of India leader Gurudas Dasgupta said.
Tax experts said the new proposal will aid better tax and accounts planning.
“Presenting the budget in January will give two months’ time to individuals and corporate to realign 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.
Income tax changes come into force only after the finance bill is passed, but these are retroactively implemented from April 1.
Parliament 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.
The finance bill, which contains tax changes, and the demands and appropriation bill, which spells out full year expenditure details, are passed in May.
Political pressures often force tax changes proposed in February during the finance bill’s passage in May.
The government is keen to conclude the process by March so that the budget spending and tax proposals can start to happen from the beginning of the financial year.
Top sources said the finance minister has begun discussions on the proposal with top bureaucrats in his ministry.
Economists are divided on the proposal, though.
“What is the point of a budget in January? Are we transitioning to the calendar year as the fiscal year?” asked a former chief economic adviser to the finance minister.
DK Joshi, chief economist at CRISIL, a credit rating firm, backed the move. “It a very positive thing and will bring in certainty once the budget is presented at the beginning of the year.”
The finance ministry official who confirmed the proposal said the government’s pre-budget consultations on taxes and policy changes will likely begin from September, instead of October in the past.
There are several other changes that next year’s budget will likely contain.
If the April 1, 2017, deadline for implementing a nationwide goods and services tax (GST) is met, Part B of the budget speech, which contains tax proposals, will mostly contain direct taxes and customs duties as other indirect taxes will be subsumed in the new uniform tax regime.
The government is examining the option of merging the rail and general budgets beginning next year, ending a 92-year-old practice. A common budget will allow a seamless national transportation policy, insulating the railways from political pressures.
The government will, as finance minister Arun Jaitley announced in his budget speech this year, do away with the “plan” and “non-plan” expenditure distinction, which is the practice, beginning 2017.