Modi government unlikely to change financial year as another budget in 2017 'unrealistic'

Prime Minister Narendra Modi's plan to align country's financial year with the calendar year is unlikely to happen from next year.

After implementing GST (Goods and Service Tax) on July 1 and last year's surprise demonetisation move, a change in fiscal year could further add to the confusion for the India Inc.

Without changing the financial year to January-December, the government could further advance the date of the presentation of the Budget by a fortnight or so, the Economic Times reported.

The paper cited a senior government official who said that changing the financial year was unlikely as presenting the budget by end of October or early November would be unrealistic.

Also, a number of states are against the union government's idea of changing the financial year. "The financial year change has been put on the back burner," Business Standard reported, saying that a final decision on the matter could be taken in 2019.

Doing away with the British-era legacy of presenting union Budget on February 28, the government had presented annual Budget on February 1 this year.

India currently follows April-March financial year, which is same as United Kingdom's fiscal year. It was adopted in 1867 principally to align the Indian financial year with that of the British government. In US, the financial year begins on October 1 and ends on September 30.

In order to move to January-December financial year, the Budget session of Parliament would have to be held well before December so that the budgetary exercise can be concluded by the year-end.

After PM Modi expressed his desire to align the financial year with the calendar year, the government had last year appointed a high-level committee to study the feasibility of shifting the financial year to January 1.

In a written reply to a question in the Lok Sabha, Finance minister Arun Jaitley had said, "the matter of changing financial year is under consideration of the government".

A NITI Aayog note had said that a change in the financial year was required as the current system leads to sub-optimal utilisation of working season.  The financial year is not aligned with international practices and it impacted data collection and dissemination from the perspective of national accounts, it said.

Madhya Pradesh had earlier announced shifting of its financial year format to January-December from 2018. The decision to change the state's financial year was taken by the state cabinet.