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Budget 2018 Simplified: Why is it different this year?

This Moneycontrol Insight18 podcast explains why the upcoming Budget is different from previous ones.

June 21, 2018 / 02:12 PM IST

New Delhi: Union Finance Minister Arun Jaitley addressing a press conference in New Delhi on Friday. PTI Photo by Atul Yadav (PTI12_23_2016_000123B)

It’s budget time once again. Woh samay jab hamara Hindustani parivar waits with anticipation to find out what will happen to our money.

But let’s start with how the government makes money and arrives at a budget, the nuts and bolts of it.

First, there’s The Receipts book. The first thing to understand is that the government is essentially like a very big khandaan. Dysfunctional maybe, but they do try to take everyone along. They’re just as much Sooraj barjatya’s Hum Saath Saath Hain even though we like to think they’re mostly just a Gangs Of Wasseypur. If those analogies don’t work for you, you have wasted your youth. Go watch Hum Saath Saath Hain.

So, the government’s earnings are pooled from various sources to meet spending needs. Ghar chalaana hai toh we have to spend on various things….roti kapda, makaan toh default hai….then there’s weekend trips, eating out, parties, family mein shaadi ke liye naye kapde, didi ki devrani ke phuphaji ki bhai ki beti ki shaadi ke liye 101 rupees ka gift, envelope mein daalke… that’s how detailed the government’s spending plans usually are. If you think that was confusing, that’s exactly how it works with the budget. The centre has to plan for all expenses and contingencies. In fact it runs short of funds and has to also borrow money to fund its expenses. Like when you considered borrowing money to buy the iPhoneX. Fine, just me then? But, more on government borrowing later.

This brings us to income streams. The government earns it’s revenue through taxes, dividends and disinvestment, spectrum sales and recoveries of loans to state governments. But first, taxes. Yep, our favourite word, isn’t it? As a wise man once said, only two things are certain in life – death and taxes. Most human ingenuity and creativity goes into dealing with this problem. People are terrified of it. Will do anything to avoid it. go anywhere to escape it. And once they’ve dealt with that issue, they get around to dealing with death too.

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But the government isn’t likely to relent. Taxes are a major source of revenue. How big? Sochiye…sau karod se zyaada abaadi…that’s a big family. And tax collections fetched the govt around 14 lakh crore rupees in 2016. That’s about 225 billion dollars. Ek ya do zero kam hi bol raha hoon shayad. But, it’s a lot of revenue.

What the govt takes from us, while promising clean water, food, housing, better roads, flyovers, faster trains and better biryani in those trains, is individual income tax. It also collects income tax from corporate entities. These are the main direct taxes. Then there are indirect taxes.  Like customs duty, excise, and service tax. Customs duty to pata hi hai aapko. That’s the extra money you pay at the airport for the 50 inch Sony tv you picked up while holidaying in Bangkok because it was cheaper there. Excise is the tax charged by the government on the goods and products that are manufactured in India. This tax structure will change post GST. For all made in india products, there’s just one tax - GST. Only customs duty will remain an indirect tax source. Kyonki the government wants you to consider buying desi products. Kyonki, who wouldn’t prefer Videocon TVs over Sony, Samsung or LG?

Non-tax revenues for the government comes mainly from dividends, profits and disinvestment in public sector companies. Other streams of revenue include recovering loans that the central government has lent to state governments for various projects and also to other countries.

At this point, the central government is looking more like the Lannister family from GoT than Hum Saath Saath Hain. But, their heart is in the right place. I think.
Moneycontrol News
first published: Jan 18, 2018 06:48 pm

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