Beruflich Dokumente
Kultur Dokumente
Seema Sharma
DMS, IITD
Budget India
Receipts Expenditure
• Capital Accounts:
All receipts and expenditure that liquidate or create an
asset would in general be under capital account. For
instance, if the government sells shares (disinvests) in
public sector companies, it is selling an asset (capital
receipt) and any expenditure like a multipurpose dam,
bridge, road etc, is a capital expenditure
Revenue Account : Revenue receipts
2. miscellaneous receipts
Capital receipts: Borrowings & other liabilities
Borrowings: When receipts of the central government are lower than its
TOTAL EXPENDITURE, it has to borrow money to meet the shortfall. It
does so from various domestic and foreign sources:
Other liabilities: In
addition to the above market borrowings, the
government incurs liabilities in encouraging people to save
through such avenues as for public provident fund (PPF), small
savings schemes such as post office savings deposits, Indira
Vikas Patra and Kisan Vikas Patra etc.
Capital expenditure:
• Creation of assets (i) purchase of land, buildings, machinery,
(b) loans by Central government to state government, foreign
governments and government companies, cash in hand and (c)
acquisition of valuables. This type of expenditure adds to the
capital stock of the economy and raises its capacity to produce
more in future.
• Repayment of loan as it reduces liability.
Deficits
• Deficits, as the meaning of the word itself suggests, mean
shortfalls in government revenues vis-a-vis its expenditure.
Three most important and widely discussed deficits are:
• 1. Revenue Deficit
• 2. Fiscal Deficit
• 3. Primary Deficit
Deficit Measures
Revenue Deficit = B – A
Fiscal Deficit = (B + D) – (A + C)
Primary Deficit = Fiscal Deficit – Interest Payments
Primary deficit is a measure for assessing the shortfall in the central government’s
current year’s revenue against its expenditure for the year ignoring the interest
payments for past borrowings.
Structural Changes in Budget
• The budget for 2017-18 comes with
various structural changes to the budget
making exercise. This includes
• (i) Removal of distinction between 'plan'
and 'non-plan' expenditure
• (ii) Advancement of budget
presentation by a month and
• (iii) Merger of the railway budget with
the general budget.
Budget 2019
https://www.indiabudget.gov.in/index.asp
As we can see, external debt is negative in 2018-19. However the debt
servicing for the previous years continue.
Do economies need a fiscal deficit?
• Many economists, including Lord Keynes, had advocated the need for small fiscal
deficits to boost an economy, especially in times of crises. What it means is that
government should raise public investment by investing borrowed funds. This
exercise is also called pump-priming. The basic purpose of the whole exercise is to
accelerate the growth of an economy by public intervention. Hence, there is nothing
fundamentally wrong with a fiscal deficit, provided the cost of intervention does not
exceed the emanating benefits.
• The darker side of the story is that the borrowed funds, which always remain on
tap, have to be repayed. And pending repayment, these loans have to be serviced.
Ideally, the yield on investment on borrowed funds must be higher than the cost of
borrowing.
• For example, if the government borrows Rs 100 at 10%, it must earn more than
10% on investment of Rs 100. In that situation, fiscal deficit will not pose any
problem. However, the government spends money on projects, including social
sector schemes, where it is impossible to calculate the rate of return at least in
monetary terms. Borrowings are also used to make the interest payments.
Fiscal Responsibility and Budget
Management (FRBM) Act 2003
• The FRBM Act provides rules for fiscal
responsibility of the Central Government. It
became effective from July 5, 2004.
In the previous scenario, a manufacturer had to pay tax when a finished product moves out from the factory (excise duty), and it is again
taxed at the retail outlet when sold (VAT).
GST is imposed on value addition at each stage in the production process, but is meant to be refunded to all parties in the various stages
of production other than the final consumer. Supplier at each stage is permitted to setoff through a tax credit mechanism- Input Tax
Credit (ITC), which would eliminate the burden of all cascading effects of various taxes existing earlier. ITC (Input Tax Credit) is the
mainstay of the GST taxation system. Seamless and efficient ITC claim makes GST beneficial for businesses is because it will help them
manner than in the previous regime.
GST: All Subsumed in one in All the Ways
GST
All Taxes subsumed in One
Tax Structure
Direct Indirect
Tax Tax
Entry Tax,
Service luxury tax,
Excise CST Custom VAT Lottery
Tax
Tax, etc.
GST Tax Structure in India
Tax Structure
Indirect
Direct Tax Tax
(GST)
Income
Wealth Tax Intra- state Inter State
Tax
If a Product produced and sold in the same state then SGST and CGST both to be paid. Suppose GST is 10%, then
5% SGST and 5% CGST to be paid. If sold outside the state then, then IGST of 10% to be paid.
GST: Subsuming of the Previous
Taxes
•Central Excise
•Additional duties of Custom (CVD)
CGST •Service Tax
•Surcharges and all cesses
•VAT/sales tax
•Entertainment Tax
•Luxury Tax
•Lottery Tax
SGST •Entry Tax
•Purchase Tax
•Stamp Duty
•Goods and passenger Tax
•Tax on vehicle
•Electricity, banking, Real state
• Of all, 7% goods & services are the exempt category. Regular consumption item
viz., include fresh fruits and vegetables, milk, butter milk, curd, natural honey,
flour, besan, bread, all kinds of salt, jaggery, hulled cereal grains, fresh meat,
fish, chicken, eggs, along with bindi, sindoor, kajal, bangles, drawing and coloring
books, stamps, judicial papers, printed books, newspapers, jute and handloom,
hotels and lodges with tariff below INR 1000 and so on.
• The GST council has fitted over 1300 goods and 500 services under four tax
slabs of 5%, 12%, 18% and 28% under GST. This is aside the tax on gold that is
kept at 3% and rough precious and semi-precious stones that are placed at a
special rate of 0.25% under GST.
• A total of 81% of all the goods and services are below or in the 18%
tax slab. This means 7 % of the items come under the exempted list, 14% of
the items attract a 5% tax, 17% of the items attract a 12% tax, and 43% of the
items attract an 18 % tax slab, while only 19% of the items fall under the highest
slab of 28% in the new regime. Below is a list of some of the products that will be
a part of the respective slabs:
Imports and GST
• In addition to the Customs Duties, the import would also be subject to the
GST.
• As per GST Act, all import of goods will be deemed as inter-state goods
trade hence attracting GST. IGST will be imposed on Imports. GST Council
will decide the rates. For that.
• While, GST would be applied to imports in addition to the Basic Customs
Duty, GST Compensation Cess can also be levied on certain luxury and
demerit goods under the Goods and Services Tax (Compensation to States)
Cess Act, 2017
Imports and GST
So if Value of Imported Good A = Rs. 100
Custom Duty (@10%) = Rs.10
= 0.05 x 110