New Delhi, Feb 1 (IANS) Describing Budget 2018-19 presented in Parliament as one that combines "fiscal prudence" with the expenditure needs of the economy, especially on agriculture, Finance Minister Arun Jaitley on Thursday blamed implementing GST for the fiscal slippage he revealed earlier in the day while raising the deficit target for the current financial year.
In this regard, the Finance Minister said that the long term capital gains tax had been reintroduced with prospective effect from February 1, 2018, in a move to cover some of the resources gap of the government.
"The Budget combines fiscal prudence with the spending needs of the economy," Jaitley said at a post-Budget briefing here.
"This year, there were a series of circumastances, a one month loss in revenue because of GST, which made up a substantial part of the shortfall he said, elaborating that the revenues for the coming March from the Goods and Services Tax (GST) implemented from July last would only be available in April after the end of the current fiscal.
"So we have a situation where there is a 12-month budget, but revenue is available only for 11 months," he said.
"Then there were a set of structural reforms, which had their own impact on the dividends of public sector enterprises, the RBI dividend," he added, referring to the twin impact of demonetisation and the GST that unfolded during the course of the year.
In his budget presentaion earlier, Jaitley made a significant announcement of fiscal slippage with implications for pushing inflation, revising upwards the government's fiscal deficit target for 2017-18 to 3.5 per cent of the GDP, or the equivalent of Rs 5.95 lakh crore. The higher target came in place of the 3.2 per cent for the current fiscal announced earlier.
He also projected a fiscal deficit of 3.3 per cent of GDP for the coming financial year.
The Finance Ministry's Economic Survey 2017-18 authored by Chief Economic Advisor (CEA) Arvind Subramanian released on Monday had said that ambitious targets of fiscal consolidation for the coming pre-election year be avoided, hinting thereby that the target of 3.2 per cent of the GDP could be exceeded.
On the expenditure front, Jaitley said that the earlier allocations on schemes had been maintained, while the stressed farm sector is a priority area
"So it is natural to look at and strengthen the weaker areas. There is serious concern when it comes to agriculture sector," he said.
He also said that to double farmer incomes by 2022, there was a need to improve infrastructure in rural areas and ensure that the farmer gets fair price for his produce.
On resource mobilisation, Jaitley said that the long term capital gains tax was being reintroduced precisely for this purpose.
The Budget 2018-19 on Thursday proposed to tax long-term capital gains on equities exceeding Rs 1 lakh at 10 per cent, which is expected to bring in revenue of Rs 20,000 crore.
"The total amount of exempted capital gains from listed shares and units is around Rs 367,000 crore last year and the major part of this gain has accrued to large corporates," Jaitley said.
However, capital gains made on shares until January 31, 2018, will be "grandfathered", he said, adding "we have protected all investments coming in before February 1."
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