Financial year date change: Panel says no need as it could lead to uncertainties without much gain

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New Delhi | Published: February 9, 2017 6:06:03 AM

A panel constituted to examine the feasibility of changing the starting date of financial year (FY) in India has recommended continuance of the current April-March format, as a change could lead to avoidable “uncertainties” without much gain

The four-member panel headed by former chief economic adviser Shankar Acharya submitted its report in late December.The four-member panel headed by former chief economic adviser Shankar Acharya submitted its report in late December.

A panel constituted to examine the feasibility of changing the starting date of financial year (FY) in India has recommended continuance of the current April-March format, as a change could lead to avoidable “uncertainties” without much gain, sources told FE.

The advancement of the Budget date (from end-February to February 1) has already addressed the issue of expenditure getting delayed (after vote on account and all, the real spending under a Budget used to get delayed to June-July). So, no need to change the FY for that,” said a person with direct knowledge of the panel’s recommendation.

The four-member panel headed by former chief economic adviser Shankar Acharya submitted its report in late December. “Besides the government, almost all Indian companies and banks follow an April-March financial year. Even Indian multinational companies with substantial global exposure, or having a major part of their revenue coming from overseas sales, have conveyed to the panel that they have no problem with the current system,” the source quoted above said. The panel is also of the view that monsoon impact on the economy is on the wane and expenditure required to tackle a bad monsoon is not very high. “Adoption of IndAS accounting standards and goods and service tax next year also make continuation of the financial year desirable,” the person said.

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After the introduction of Ind-AS for all companies with a net worth equal to or above R500 crore from the start of this financial year, the new globally-compliant accounting norm will be extended to unlisted firms with a net worth of R250 crore or above and all listed firms from April 1, 2017. Companies have made preparations keeping in mind the current FY system.

One alternative to ‘April-March’ was ‘January-December’, which is followed by many major economies in the world, barring the notable exception of the US. This would have necessitated a massive exercise for the Central Statistical Organisation to shift to the new regime. After holding extensive consultations with the Reserve Bank of India, Comptroller and Auditor General of India, Institute of Chartered Accountants, many Union ministries including agriculture and states, the panel concluded that no change is required to the current financial year regime.

The panel’s terms of reference included examining the merits and demerits of various dates for commencement of the financial year including the existing one. Other terms of reference were the suitability of the financial year from the point of view of correct estimation of receipts and expenditure of central and state governments, the effect of the different agricultural crop periods and the relationship of the financial year to the working season. The panel was also to factor in the likely impact on businesses; taxation systems and procedures; statistics and data collections; the convenience of the legislatures for transacting budget work.

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