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Changes in financial year need Centre-States coordination (Relevant for GS Prelims and GS Mains Paper II and III)

Madhya Pradesh has decided to shift its financial year that now runs from April 1 to March 31, to align it with the Gregorian calendar year — that is, January 1 to December 31.

M.P. government’s move is abrupt as there was no hint of this plan when it presented its 2017-18 Budget a couple of months ago. The decision is believed to be taken in haste.

Shankar Acharya committee
Centre had appointed a committee under former Chief Economic Adviser Shankar Acharya on the desirability and feasibility of changing the fiscal year in line with the calendar year, aligning it with the practice in most countries as well as multilateral agencies.

Its recommendations are still not in the public domain.

Changes in the financial year need proper coordination between the Centre and States
1. The Union Budget was shifted from February 28 to February 1 this year, to ensure that funds are available with ministries from the first day of the financial year. By the same logic, will it be advanced further to November 1 if the financial year starts in January?

2. Otherwise, eager States such as M.P. may start 2018 with a clean slate but will have to wait till February for clarity on the Union government’s priorities for the coming year and till April for Central funds.

3. It will, in addition, be a fresh nightmare for firms adapting to the Goods and Services Tax regime that will be introduced in the middle of this financial year.

4. Additional uncertainties and differing tax deadlines for States are not likely to enthuse investors.

Way out
The Centre must make the Shankar Acharya panel report public, and clarify its own road map so that States and taxpayers may align with it.

(Adapted from The Hindu)



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