What is the issue?
The government is considering the proposal to change the financial year from April-March to January-December.
What are the merits?
- The shifting of financial year will align India with the prevailing practice of developed countries.
- This will be a progressive, convenient transition for the Indian economy as it gets increasingly integrated to the global economy.
- For MNC firms in India, which are currently dealing with two types of financial years here and at the parent country, a uniform structure will be a relief to manage their accounts.
- The change will also align the financial year with the monsoon cycle and also with the country’s crop harvests both for Rabi and Kharif seasons.
- Another important factor is that at present the budget cycle suffers due to lack of sufficient data on crop income, monsoon forecast etc.
- Presently, before the budget presentation in February, the government doesn’t get any solid data on monsoon forecast for new financial year.
- The rain gamble causes difficulties in formulating the budget.
- Most importantly, it is about time India moved on from colonial tradition and decided on issues based on merit.
What are the demerits?
- If we want the transition, then major changes like shifting Parliamentary Sessions, Budget presentation in Nov-Dec, etc., will be needed.
- The one time implementation cost along with major financial reforms like GST rollout and merger of plan and non-plan expenditure may be too big a burden to handle.
- Already, there is confusion in the industry with the change in the tax system when the GST finally happens.
- A shift to new fiscal year, too soon, will add to this.
- Also, a host of statutes and taxation laws will need to be amended for the change to take place.
- Thus, the move will be a costly and cumbersome administrative exercise for both companies as well as the government.
- The economic benefits would definitely outweigh the administrative difficulties that will arise initially for the implementation.
- The change will indeed be a progressive step it seems there is no urgency to implement when the GST is still facing multiple hurdles.
Source: Business Line
