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govt budgeting(b) (b procedure (interim budget (includes only the…

- - - - introduced as finance bill
        
        contains the proposals for taxation
        
        passed after appropriation bill is voted on
    - - intro as appropriation bill
        
        includes
        
        demand for grants by ministries
        
        charged expenditure (art 112 (3))
        
        included only for accounting convenience
        
        ie, even if the appropriation bill lapses, it will be met out of CFI
  - - - policy cut motion
        
        to remove a policy of a ministry completely
        
        govt is censured if passed by simple majority
        
        govt has to then pass confidence motion - failing to it, govt lapses
        
        reduces outlay of policy to rs 1
      - economy cut motion
        
        to reduce the outlay of a policy
        
        no effect on govt if passed
      - token cut motion
        
        passed to seek answers for questions about a policy from the ministry
        
        cut 100 rs from outlay of policy
        
        no effect on govt if passed
  - - - reduces need for vote on account
      - gives more time for detailed budget discussion - hence reducing possibility of guillotine
- - - - revenue exp - revenue receipts
    - - 2018-19
        
        target - 1.5%
      - 2017-18
        
        2.6%
    - - hence paid by capital receipts
        
        which either creates liability or reduce assets
        
        to pay for revenue exp which neither creates assets nor reduce govt liability
      - hence revenue deficit is bad for economy
      - shows revenue expenditure which the govt is not being able to meet through the revenue receipts
  - - - total exp - (revenue receipts + non debt creating capital receipts)
    - - 18-19
        
        target = 3.3% of GDP
      - 2017-18 = 3.5 %
    - - shows the total debt creating borrowings of the govt in a financial year
      - its not as bad as revenue deficit as borrowings can/may be used for creating assets which will generate income in long run and are good for economy
  - - - fiscal deficit - interest payments
    - - indicates how much of the govt borrowings are used for expenses other than interest payments
      - diff b/w fiscal and primary deficit shows the amount of interest paymets on the debt creating borrowings made in past
      - govt spendings - interest payments > defence > subsidies
    - - 2017-18 = 0.1%
  - - - its liability of govt to pay it back to RBI
      - aka deficit financing
      - part of the fiscal deficit bridged by printing new currency
    - - printing currency is part of govt market borrowing program
      - leads to monetisation of the economy
      - inflationary in nature
      - discontinued after 1997
  - - - revenue deficit - grants given by centre to states for capital assets creation
    - - 2019-20 target = 0.2%
      - 2017-18 = 0.7%
- - - - income > exp
      - generally followed in developed country
      - lower budget deficit or no deficit - ie if budget deficit is getting lower, we say govt is following contractionary fp
    - - income = exp
      - the govt spending is fully funded by revenues collected
    - - income < exp
      - generally followed in developing country -eg - india
  - - - revenue
        
        types
        
        non tax
        
        fees, fines, dividend received, interest received, grants received
        
        tax
        
        direct
        
        indirect
        
        means
        
        neither creating repayment liability nor reducing assets
      - capital - means/types
        
        creating repayment liability / debt creating
        
        loans & borrowings (both internal and external)taken by govt
        
        reduce assets
        
        recovery of loans
        
        proceeds form disinvestments
        
        proceeds from sale of govt assets(land, building, machinery etc)
    - - revenue
        
        types
        
        non developmental
        
        interest payments
        
        grants to states
        
        all defence exp
        
        subsidies
        
        salaries
        
        pension
        
        (law & order, civil)administration exp
        
        developmental
        
        maintenance of various assets
        
        exp on R&D
        
        some are committed exp - these cant be avoided - eg: interest payments, pension to the retired employees
        
        means
        
        neither reducing repayment liability nor creating any asset
      - capital - means
        
        reducing repayment liability
        
        repayment of loans
        
        asset creation
        
        investment in infrastructure
        
        loans to state govts
  - - - supply of money in the economy
      - and the rate of interest
- - - - indirect
        
        GST
        
        provisions
        
        destination based tax - state in which g&s is sold will get the tax
        
        subsumes 17 indirect taxes - excise, VAT, service tax, luxury tax etc
        
        taxes not subsumed
        
        basic custom duty
        
        anti dumping duty
        
        central excise on petroleum products
        
        VAT on alcohol
        
        stamp duty
        
        property lax(levied by local bodies)
        
        professional tax etc
        
        levies on all products excluding(can be levied on them later)
        
        petroleum products
        
        real estate
        
        electricity
        
        slabs - 0, 5, 12,18, 28
        
        how tax collected
        
        tax collected by 1 authority and distributed b/w centre and that state(destination) from where t is collected
        
        tax to be by given by producer/seller on value of g&s
        
        producer/seller will get the input tax credit(ITC) once he submits the bill which shows that tax has already been given on the (current value of g - value added by the producer/seller)
        
        sector out of GST
        
        alcohol for human consumption
        
        reverse charge mechanism (RCM)
        
        but in some
        cases, liability to pay t falls on
        the buyer - called reverse charge
        
        hence businesses avoid doing business with these suppliers
        
        GST has to be typically paid by the
        supplier of g&s
        
        cases - when a business buys g&s from a supplier
        
        not registered to pay GST - eg when turnover < 20 lakhs
        
        in cases of import
        
        registered with GST but opted for composition scheme
        
        E-way bill
        
        document to be carried by conveyance person carrying goods of value > Rs. 50,000 for sale beyond 10 km
        
        generated from GST Common
        Portal by registered persons (buyer or seller) or
        transporter
        
        benefits
        
        transport moving without e-way bill will help govt to catch businesses evading tax
        
        it develops central repository of all the transits that are happening
        
        eliminate requirement of separate transit pass for each state
        
        auto-calculation of distance
        based on PIN codes
        
        benefits - for
        
        govt
        
        easier to collect
        
        only 1 t collection agency
        
        online filing
        
        reduced t evasion
        
        difficult to evade t - better compliance
        
        1 more item...
        
        increased t collection
        
        increased tax base
        
        3 more items...
        
        facts
        
        2 more items...
        
        customers
        
        easier to understand
        
        reduce t burden
        
        industry
        
        reduced cascading effect
        
        earlier - though VAT existed, cascading effect still persisted
        
        eg: VAT would levy tax on excise duty
        
        now - due to application of only 1 tax(gst), redn in cascading effect
        
        harmonisation of t laws, procedures and rates -
        
        one nation one market one tax
        
        3 more items...
        
        single online return filing system
        
        quick flow of ITC
        
        other
        
        cooperative federalism - GST council
        
        GST data - improved GDP estimation
        
        challenges
        
        cascading effect(CE) persists
        
        more items outside gst, more will be the CE
        
        due to products outside GST ambit
        
        t evasion
        
        can happen if units produced are not taxed at any level of value addition
        
        delays in ITC refunds - detrimental esp for expoters
        
        complex GST structure
        
        multiple rates
        
        GST exclusions - contribute 35-40% to indirect t revenue
        
        digital infra and data security
        
        implementation of anti-profiteering norms
        
        launched on 1st July, 2017
        
        way forward
        
        include petroleum products and real estate
        
        2 slabs
        
        means tax imposed on someone but borne by someone else, ie its burden can be shifted to other person
        
        DDT
        
        what
        
        dividend distribution tax
        
        tax on dividends paid by company to its shareholders
        
        taxed at source
        
        ~ 15%
        
        abolished in budget 2020
        
        new policy
        
        dividends to reach in full to shareholders
        
        dividends to be part of income - will be taxed as per tax slab applicable to recipient
        
        comment - wrt abolition
        
        hurt big investors - (30% tax)
        
        benefit small investors - low income tax slab
      - direct
        
        corporate
        
        no slabs
        
        30% on domestic companies profits
        
        40% on foreign companies profits
        
        tax on companies profits = company's expenditure - revenues
        
        MAT
        
        = 18.5% of book profit
        
        whichever of MAT and corporate tax is higher, that is paid to govt
        
        introduced to companies having large profits but were not contributing to the govt by way of corporate tax by taking help of incentives and exemptions given in income tax act
        
        introduced in finance act of 1987 and incorporated under income tax tax 1961
        
        shipping and life insurance companies are exempted
        
        book profit is the profit made when following things are not included in expenditure of the company - dividends, losses of subsidiary companies, money reserved in any account, etc
        
        income
        
        means
        
        burden is borne by the same person on whom it is levied, ie its burden cant be shifted
        
        data
        
        securities transaction tax
        
        tax applied to all equity transactions
        
        introduced in 2004
        
        STT on delivery based equity share was 0.125% but in 2013-14 budget it was reduced to 0.1%
        
        tonnage tax
        
        depends on
        
        net registered tonnage
        
        includes
        
        no. of days ship is used
        
        tonnage it carries
        
        doesn't depend on profits of company
        
        introduced in 2004-05 to boost indian shipping industry - how
        
        earlier corporate tax was applied - 30%
        
        now tonnage tax - 1.2%
        
        but 20% of book profit of company has to be used to buy new ships
        
        legislated under income tax act
    - - progressive
        
        as a income of person goes up, tax rate also increases
        
        eg: income tax
        
        obj - reduce income inequalities
      - regressive
        
        levied on all products/services without considering consumers' group income - poor and rich are equally impacted
        
        hence, burden will be more on poor
    - - advolaram
        
        tax on total value
        
        eg: cloth manufaturer produces 1 lakh worth of clothes - tax will be on 1lakh
      - specific tax
        
        tax based on some specific attribute of a commodity
        
        eg: tax on cigerrates based on its length
    - - cess
        
        for specific obj
        
        4% health and edu cess on individuals and corporates
      - surcharge
        
        charged from very rich individuals, (also levied on tobacco etc)
        
        aim - reduce income inequalities
        
        15% surcharge for income above 1 crore
  - - - list 2 - state list - taxes icluded
        
        toll, tax on animal and boats, capitation tax(lumpsump), luxury item, octroi, sale&consumption of electricity, agri income, etc
      - list 3 - concurrent list - both can levy tax
        
        stamp duties, etc
      - list 1 - union list - only centre can levy tax
        
        income tax other than agri income, excise duty, custom duty, corporate tax, etc
  - - - changes in tax revenue in response to changes in tax rate
    - - changes in tax revenue in response to changes in GDP
- - - - hence estimates are not based on previous years estimates and actual figures - hence the term zero base(ie, no base year)
      - expenses must be justified on the basis of present needs and requirements
      - all expenses are evaluated/estimated each time a grant is made
    - - gives more accurate b than traditional b(base year expenses + inflation costs)
      - helps in cutting exaggerated costs
      - it phases out programs not having relevance anymore
    - - time and effort consuming exercise
  - - - ie, evaluating b provisions wrt gender perspective
      - a continuous process of keeping a gender perspective in policy/ programme formulation, its implementation and review.
    - - put pressure for formulation of gender sensitive policies and programs
      - secures gender equality in b process
    - - though accounting for nearly half the country's popn, women lag behind men wrt social indicators - hence they require focused attention
    - - 1st country to adopt - australia
      - adopted in i in 2005-05
  - - - comprises of outlay(exp allocated) of programs listed on basis of outcomes (measurable physical targets) to be achieved
- - - - coming/following(2019-20
        
        budget estimates, ie, estimated(expected) expenditures and revenues for the following/coming financial year
        
        the proposal of ways and means to raise the receipts and meeting the expenditure for the following financial year
      - current(2018-19)
        
        budget estimates - that were estimated 1 year back
        
        revised estimates, a review of financial position of
        
        estimated revenues and exp in the last quarter of current financial year
      - previous(2017-18)
        
        actual income and spending figures