9 thoughts on “India budget – part 3

  1. Reg the establishment expenses it is due to the seventh PC and likely due to allowances which were paid out only from July 2017. The 2017 budget didn’t provide for this so there’s an overshoot.

    Reg the GST compensation they have just budgeted the entire amount collected as cess. That amount is around 7500 cr monthly so that’s 90000 crore over 12 months.

    Technically if the compensation paid out is lower than this amt then the balance has to be kept in the GST compensation fund till the end of five years from July 1, 2017. After end of five years this balance is shared equally between centre and states. In the interim centre has access to this cash flow but it cannot be used to lower the deficit or support any spending. That is my understanding as per the GST compensation bill.

    Of course the government has played fast and loose with budget rules and accounting. So there are no certainties.


    1. yes, I forgot to add that. The compensation budgeted for under Dept. of Revenue is exactly the cess amount budgeted. Yes, now that the transfer and the cess are matched, I agree that my claim about the ‘buffer’ is no longer correct. In any case, thanks for the clarification on the ‘escrow’ type arrangement.


  2. The increase in other transfers is due to GST compensation paid to states. It exactly matches the inflow under the GST cess. So both tax revenues and revenue expenditure should be adjusted for this amount (around Rs 610 bn in FY18 and Rs 900 bn in FY19) for like to like comparison.


      1. I have seen that. GST compensation is not a finance commisison mandated transfer. So it is treated as a revenue expenditure item. It is there in the Min of Finance grants in expenditure budget.


      2. Thank you for enlightening me. I have seen them now. The transfer to States for GST constitutes the biggest part of the Revenue Expenditure Overshoot – around 60,000 crores. Establishment Expenses around 31,000 crores. Half of which come from higher than budgeted pension payments. Wonder if it was the effect of the Seventh Pay Commission recommendations? Thank you very much!


      3. Interesting that the government has budgeted for another 90,000 crores of transfer to States and UT for GST compensation, I guess, for 2018-19 even as they anticipate a much more robust GST collection. If that materialises, this entire 90,000 compensation may not be needed. It may be construed as a buffer.


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