We knew it was coming and the government is now considering to change Indian Fiscal year from April-March to January-December, as per the statements given by Finance Minister Arun Jaitley at Parliament today.
Government of India has been talking about changing the fiscal year since the beginning of this year and it is now clear that they are planning to consider this and make it official. The main goal behind advancing the Financial year to January-December is to align it with agricultural and monsoon income stats. The April-March year was set by British to align it with Britain’s financial year and India has kept that unchanged even after independence. But it is difficult for the government for budget estimation as the agricultural stats aren’t aligned.
Agriculture, of course is one crucial source of income for India and it is certainly beyond our control to change its onset and seasons. So all the government can do is shift the financial year in alignment with the agricultural season and hence January-December. In fact, Madhya Pradesh has already announced to advanced its fiscal year and will be implemented from this year. Talking about central implementation, the government can’t just swing in and change it right away. There are a huge number of things to be taken care of, prior to shifting the Financial year slot.
First, change of fiscal year this year will cause a major economic disruption right after rollout of GST in July and demonetisation in November last year. Also, it is practically impossible because if the financial year is changed, the Union Budget has to be presented by November and that is not even close to happening this year. That doesn’t end there, it will also require amendments to all the taxation system and company acts. Payment of taxes, filings, scrutiny and assessment dates by Income Tax Department will have to be changed immediately. All this comes with a massive change in massive amount of data, and all this requires time.
Again, it will cause hiccups to the Indian economy, once again, for second time in less than a year! Is India ready for the third major economic blow? Is that even a question! It certainly isn’t, although it will not be as disruptive as demonetisation, but it will still affect every single business in India. During the presentation of plans against Parliament, Arun Jaitley didn’t mention of when will it be implemented, but most likely to be implemented by next year, so expect another economic blow next year.