The Shake-up in Budget 2017

The Finance Ministry is preparing for a major budget exercise realignment with the incorporation of three major changes that are infront of the Cabinet right now.

Removal of the plan-nonplan classification of expenditure is the much anticipated one. Besides, the Ministry is preparing for merging Railway budget with the general budget.

Another component that may altogether shift the revenue side is an early or rather timely consensus on GST. If GST discussions are finished well before the budget formulation stage, the tax design procedure should accommodate the GST structure.

On the first change, that is the phasing out of the plan and non-plan classification, the preparation difficulty is much less as already the government is going through the process of shifting away from the planning era practices.

Now, the major classification remains the economic and functional one with budget is divided into revenue and capital budgets.

The novel element of the planned shake-up will be the merger of Railway budget into the General budget. A Committee under Shankar Acharya has submitted for analyzing the technical side of such a merger and the Cabinet is considering the proposal.

If implemented, the Railway budget details will be inducted as annexure to the general budget.

From the government’s side, the merger of the two will end political scrutiny of the railway budget proposals and will end the possible popular negative sentiments.

The third and perhaps the most important one is the finalization of the GST structure well before the budget date. If it happens, the new budget will come with a different look. Less number of tax rates, limiting the commodities and services into the agreed rate size etc. will make the budgetary exercise different. At the same time, adjusting to the new format itself need time for the Ministry to best fit the commodities into the agreed tax rate structure.