Gujrat Public Finance and fiscal Policy

FISCAL POLICY

Fiscal Policy is prepared by Government and consists of various expenditures and revenues. Fiscal policy deals with the revenue and expenditure decisions of the government.

The government fiscal policy is used to stabilize the level of output and employment through changes in its expenditure and taxes. The government attempts to increase output and income and seeks to stabilize the ups and downs in the economy.

In the process, fiscal policy creates a surplus (when total receipts exceed expenditure) or a deficit budget (when total expenditure exceeds receipts) rather than a balanced budget (when expenditure equals receipts).

Fiscal policy can achieve important public policy goals like growth

Equity
Promotion of small scale industries
Encouragement to agriculture
Location of industries in rural areas
Labour-intensive growth
export promotion
development of sound social and physical infrastructure

The two main instruments of fiscal policy are:

(a) Government Expenditure

(b) Government Receipts

Expenditure :- It s divided into :-

Revenue expenditure and

Capital expenditure

Receipts :-They are divided into

Revenue receipts

Capital receipts

TAX REVENUES

India has a well-developed tax structure with clearly demarcated authority between Central and State Governments and local bodies.

Non Tax Revenues

Public Finance in Gujarat

As per the provisional accounts, the total receipts during the year 2015-16 was Rs.121094.23 crore which is higher by Rs.8800.13 crore than the previous year 2014-15.

Revenue receipts and capital receipts were higher by Rs. 5504.80 crore and Rs.3295.33 crore respectively than the previous year. The expenditure during the year 2015-16 was Rs. 126817.43 crore, which was higher by Rs.10148.85 crore than the previous year 2014-15.

The revenue expenditure and capital expenditure were higher by Rs. 9126.84 crore and Rs. 1022.01 crore respectively compared to the previous year 2014-15.

As per the provisional accounts of 2015-16, the receipts on revenue account was about Rs.97482.58 crore, while the total outgoings on revenue account was about Rs.95778.54 crore, leaving a surplus of Rs. 1704.04 crore under revenue account.

Under the capital account, total expenditure was Rs. 31038.89 crore against the capital receipts of Rs. 23611.65 crore, showing a deficit of Rs. 7427.24 crore.

During the year 2015-16 on the capital account, expenditure on discharge of internal debt was Rs. 5534.06 crore against the final accounts of Rs. 4849.01 crore for the year 2014-15. The total deficit on revenue and capital account together for the year 2015-16 works out to Rs.5723.20 crore, while the contingency fund and public account recorded surplus of Rs. 10.41 crore and net surplus of Rs. 5503.16 crore. Thus, the Government account for the year 2015-16, show total net deficit of Rs. 209.63 crore .

Tax Receipts

As per the provisional accounts for the year 2015-16, total tax revenue was Rs. 78339.85 crore which is higher by 9.36 percent than the final account of Rs. 71636.16 crore for the year 2014-15.

Share in Central Taxes

As per the provisional accounts for the year 2015-16, the state share in central taxes was Rs. 15679.02 crore, which is higher by about 52.28 percent than the final account for the year 2014-15 of Rs.10296.26 crore. Sales Tax/Value Added Tax (VAT)

As per the provisional accounts for the year 2015-16, the proceeds from Sales Tax/VAT are placed at Rs.44091.05 crore, which is lower by about 0.12 percent than the final account for the year 2014-15 of Rs.44145.26 crore.

State Budget 2016-17 (B.E.)

As per budget estimates for the fiscal year 2016-17, the receipts on revenue account are estimated at Rs.116365.98 crore, while total outgoings on revenue account are placed at Rs.113129.90 crore, leaving a surplus of Rs.3236.08 crore under revenue account. Under the capital account, total expenditure is estimated at Rs. 36762.48 crore as against an estimated receipts of Rs. 29796.90 crore. The budgetary transactions under capital account for 2016-17 are expected to result in a deficit of Rs.6965.58 crore. The total deficit of revenue and capital account together for the year 2016-17 works out to Rs. 3729.50 crore. However, the overall surplus for the year 2016-17 is estimated at Rs.245.49 crore considering net surplus of public account.

Goods and Services Tax (GST)

GST is one indirect tax for the whole nation, which will make India one unified common market. The GST intends to subsume most indirect taxes under a single taxation regime.

GST, will replace multiple state and central taxes to create one national market and single tax in the country. This bill seeks to subsume all central indirect levies like excise duty, countervailing duty and service tax and also state taxes such as value added tax, entry tax and luxury tax, to create a single, pan-India market.

GST is a single tax on the supply of goods and services, right from the manufacturer to the consumer. Credits of input taxes paid at each stage will be available in the subsequent stage of value addition, which makes GST essentially a tax only on value addition at each stage. The final consumer will thus bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages. This is expected to help broaden the tax base, increase tax compliance, and reduce economic distortions caused by inter-state variations in taxes.

Our Constitution empowers the Central Government to levy excise duty on manufacturing and service tax on the supply of services. Further, it empowers the State Governments to levy sales tax or value added tax (VAT) on the sale of goods. This exclusive division of fiscal powers has led to a multiplicity of indirect taxes in the country. In addition, central sales tax (CST) is levied on inter-State sale of goods by the Central Government, but collected and retained by the exporting States. Further, many States levy an entry tax on the entry of goods in local areas.

This multiplicity of taxes at the State and Central levels has resulted in a complex indirect tax structure in the country that is ridden with hidden costs for the trade and industry.

In order to simplify and rationalize indirect tax structures, Government of India attempted various tax policy reforms at different points of time. A system of VAT on services at the central government level was introduced in 2002. The states collect taxes through state sales tax VAT, introduced in 2005, levied on intrastate trade and the CST on interstate trade. Despite all the various changes the overall taxation system continues to be complex and has various exemptions.

This led to the idea of One nation One Tax and introduction of GST in Indian financial system. This is simply very similar to VAT which is at present applicable in most of the states and can be termed as National level VAT on Goods and Services with only one difference that in this system not only goods but also services are involved and the rate of tax on goods and services are generally the same.

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