The algebra of state spending

Budget 2019 aims at a fiscal deficit of 3.3 per cent of Gross Domestic Product, with an increase of 25.6 per cent in revenue receipts and of 20.5 per cent in total expenditure.

The quality of expenditure is set to worsen, with increase in revenue expenditure by 21.9 per cent and of capital expenditure by only 11.8 per cent. Within the former, subsidies are slated to go up by 69 per cent and interest payments by 13.4 per cent. Net tax revenues are expected to surge by 25.3 per cent, non-tax ones by 27.2 per cent and disinvestment by 23.5 per cent.

On the revenue side, indirect tax collections are slated to go up by 19.4 per cent. The government has raised the special additional excise duty and road and infrastructure cess on petrol and diesel by Rs 1 a litre. It estimates excise duty collection to go up by 29.9 per cent of the Goods and Services Tax (GST) by 14.1 per cent.  

Customs revenue is expected to go up by 32.2 per cent, driven mostly by an increase in duties to protect domestic industry on import of items such as cashew kernel, PVC, vinyl flooring, tiles, metal fittings, mountings for furniture, automobile parts, certain kinds of synthetic rubbers, marble slabs, optical fibre cable, CCTV cameras, IP cameras, digital and network video recorders, certain electronic items,  palm stearin, fatty oils, various kinds of papers, gold and other precious metals and, believe it or not, books!

Of course, Customs duties on import of some items have been reduced or exempted. Such as specified defence equipment, certain inputs of CRGO sheets, amorphous alloy ribbon, ethylene di-chloride, propylene oxide, cobalt matte, naphtha, wool fibres, inputs for manufacture of artificial kidneys and disposable sterilised dialysers, fuel for nuclear power plants, certain parts of electric vehicles and capital goods required for manufacture of specified electronic goods. However, the consequent revenue loss is more than made up by increase in import duties on other items.

The Finance Bill contains proposals to amend the Customs Act, to facilitate trade, ensure compliance and reduce litigation. The proposals give more powers to Customs officers and include tougher measures and punishment for offenders. Misuse of duty-free scrips and drawback facility involving more than Rs 5 million will be a cognisable and non-bailable offence.

It is proposed to amend the Central GST Act, to give effect to several decisions of the GST Council. These include changes relating to the new optional composition scheme for service providers, raising of the registration threshold for goods supplier from Rs 2 million to Rs 4 million, prescribing annual and quarterly tax payment for composition dealers,  charging of interest only on net tax liability, making Aadhaar authentication mandatory for certain classes of tax payers, creation of a National Appellate Authority for Advance Ruling to hear appeals against conflicting advance rulings on the same issue by the appellate authorities of two or more states, and so on. Some beneficial retrospective amendments have been proposed under the service tax and GST laws.

A dispute resolution-cum-amnesty scheme, called Sabka Vishwas Legacy Dispute Resolution Scheme, 2019, is being introduced for resolution and settlement of legacy cases of central excise, service tax and cesses that have got subsumed in GST.

Overall, the finance minister has done a fair job, considering the limited time she had for making this Budget.

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