After the implementation of the goods and services tax, the finance ministry has done some modification in its cash management system linked with the central government. The changes are done in the consideration of changes in the date of tax receipts due to the goods and services tax receipt.
Recently in an office memorandum, the ministry of finance stated to all its financial advisers from all the department and ministries asking them for monthly/quarterly expenditure plan directing it at the budget division of the ministry in max two weeks from now.
The reason is to ascertain respective demands in the grants which would be presented in the parliament. All the larger release of funds ranging from INR 200 to 2000 crore will be falling in 21st and 25th of a month to ‘take advantage of GST inflows‘. There is a change in dates as earlier the dates were in 8th to 21st of a month.
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In between all this, the finance ministry also referred to the ministries and respective departments to keep in check all the expenditure crossing the mark of INR 2000 crores which are to be in line with the last month of every quarter for the proper utilization of direct tax inflow in June, September, December and March.
In the memorandum, it is said that “The releases (more than Rs 2,000 crore) may be kept within 17th and 25th in these months.” It is also stated in the memorandum that, “The early permissions from the division of budget of finance ministry must be pre requisite for any payment release of INR 5000 crore or more.”
The finance ministry also mentioned that the monthly and quarterly expenditure plan based on the cash assumptions and proposed calendar preparations for government borrowings. The statement in the memorandum said that “Deviations from monthly/quarterly expenditure plan may result in distortions in the cash planning by Government of India with multiple negative implications including increased cost of borrowing and hence would be viewed seriously.”
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Apart from this, it is stated that above 33 percent and 15 percent of the budget expenditure may be permissible subsequently in the last month and the last quarter of the financial year. The statement mentioned that, “The restriction shall be observed both scheme-wise as well as for Demand for Grants as a whole.”
