Prime Minister Narendra Modi during a Niti Aayog's governing council meet on Sunday pitched for shifting the fiscal year to January to December period.
Prime Minister Narendra Modi during a Niti Aayog’s governing council meet on Sunday pitched for shifting the fiscal year to January to December period. Niti Aayog vice chairman Arvind Panagariya said the prime minister wants this change as it is appropriate from the point of view of farmers.
The change to January-December financial year would mean shifting the tax assessment year, changes in the infrastructure, specially at the company level. This may also mean advancing the budget day before January. This year the government presented the Budget on February 1 and not at the end of February or beginning of March as done earlier. On the changed budget dates, Modi at the Niti Aayog meet said in a country where agricultural income is exceedingly important, budgets should be prepared immediately after the receipt of agricultural incomes for the year.
Most of the countries follow the January to December period and if India takes forward this change, it would mean aligning with the fiscal years globally. Madan Sabnavis, chief economist at rating agency, CARE believes that changing to a January-December year or continuing with the April-March period would not make much difference in the current system. However, it will be a problem for the companies that has been maintaining April-March financial year. “They will have to do a lot of housekeeping and readjustments which may be disruptive for them, but there would be not much of a change as such.”
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If we will move to the January-December financial year as suggested by the Prime Minister, it will be like correcting the aberrations and coming in line with the current era, feels Sujan Hazra, Executive Director, Chief Economist, Co-Head Research at Anand Rathi Securities. He said that if this change is effected then it may bring in change in targets and budgets of the companies and government, which may marginally increase the cost that will be one time.
Companies across India and government departments are gearing up to change that will come with Goods and Services Tax (GST). This shift to a new financial year may be prove to be a little disruptive for them and they may have to deal with twin challenges.
“Any change in Financial Year at this crucial time prior to launch of GST may create additional challenges for businesses. And businesses may be unprepared to take it on. A change in FY could result in a transition period and businesses may have more than a handful to deal with. This can cause some business disruption and slowing of output to manage one or the other financial year. Until GST has been launched and settles down, FY change could be considered in the next 2-3 years or so,” Archit Gupta, Founder & CEO, ClearTax.in