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 andcumbersome 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.
