The government has constituted a four-member committee to examine the desirability and feasibility of having a new financial year. The committee, headed by former Chief Economic Adviser Shankar Acharya, will look into the impact of having a new financial year in relation to effect of different agricultural crop periods, taxation systems and procedures and impact on businesses.
Former Cabinet Secretary K M Chandrasekhar, Tamil Nadu’s former Finance Secretary P V Rajaraman and Centre for Policy Research Senior Fellow Rajiv Kumar are the other members of the committee. The committee shall submit its report to the government by December 31, a finance ministry release said.
The committee will examine merits and demerits of various dates for the commencement of the financial year, including the current date of April 1, taking into account the studies done in the past on the desirability of a change in the financial year, the release said. It will also look into the suitability of a new financial year from the point of view of receipts and expenditure estimates of central and state governments, relationship of financial year to the working season, statistics and data collection, and the convenience of legislatures for transacting Budget work, it said.
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“The committee may, after due examination of all relevant factors, recommend the date of commencement of the financial year which in its view is the most suitable for the country,” it said.
If the committee recommends a change in financial year, the committee will also work out the modalities for effecting the change, in terms of appropriate timing of change, determination of a transition period and change in tax laws during transition period, it said. The committee will also look into the amendments that may be required in various statutes and changes in the coverage of the recommendations of the Finance Commission, if it recommends a change in dates of the financial year.
In 1984, the LK Jha committee, which was constituted to assess a change in the financial year, had recommended migration to the calendar-year cycle. The committee had said that changing the financial year to start from January would cushion the Budget from the impact of southwest monsoon.
The then Congress government had decided against accepting the recommendation on three main grounds. First, the it had reasoned that advantages from the changeover were too minimal. Second, a change in financial year could upset collection of data from the markets, would take a long time before normal rhythm of the budget cycle is restored. Lastly, the change would give rise to issues such as extensive amendments to tax laws and systems, financial procedures relating to expenditure authorisation, and other matters.
Will consider several factors
It will also look into the suitability of a new financial year from the point of view of receipts and expenditure estimates of central and state governments, relationship of financial year to the working season, statistics and data collection etc.
If the it recommends a change in financial year, it will also work out the modalities for effecting the change, in terms of appropriate timing of change, determination of a transition period and change in tax laws during transition period.