The anxiety that grips companies and individual taxpayers ahead of the Union budget every year may soon become a thing of the past, if the government adopts a key recommendation of the 13th Finance Commission.
The commission, which submitted its report to the President on Wednesday, has asked the government to stop tweaking tax and duty rates annually and switch to a three-year rolling budget, said an official tracking the matter.
The commissions suggestion apparently finds favour with Prime Minister Manmohan Singh, said the official, who didnt want to be named because the commissions report is confidential until it is presented to Parliament next month.
If the government accepts the recommendation, it would still take at least two to three years to introduce the new system, the official said.
A rolling budget would mean tax and duty rates remain unchanged for a longer period, and thus help companies and individuals plan their financial strategies better. It would also help improve the quality of government expenditure.
The government can still bring mid-course or annual changes, but these would be fewer and would have to be justified to Parliament.
Developed countries such as Britain follow a similar practice.
It is about time India moved on to such a system, said Amit Mitra, secretary general of trade body FICCI. Certainty about a stable tax regime for a reasonable period of time would help entrepreneurs in estimating their returns on investment.
The suggestion to switch to a rolling budget is part of a radical overhaul of the budget-making process recommended by the finance commission.
Although Indias economy has transformed in the past two decades, the governments budgetary practices havent seen such change that reflect the demands of a trillion-dollar economy.
The finance commission, whose core task is to tell the central government how to share its tax collections with states, was also asked to suggest a new roadmap on fiscal management.