The finance ministry on Wednesday released Rs 18,000 crore of tax refunds to 1.4 million income-tax payers and 100,000 businessmen awaiting Goods and Services Tax (GST) and customs refunds and asked government departments to restrict their expenditure in the fiscal first quarter (April-June) — the first to improve the cash position of individuals and businesses in the midst of the Covid-19 pandemic; and the second to conserve scarce cash and direct it where it is needed most during the crisis.
“In the context of the COVID-19 situation and with a view to provide immediate relief to the business entities and individuals, it has been decided to issue all the pending income-tax refunds up to Rs 5 lakh, immediately,” a statement issued by the department of revenue said.
Similarly, all GST and customs refunds will also to be released to provide immediate cash in hand to about 100,000 business entities, including micro, small and medium enterprises (MSMEs), it said.
“Businesses which have borne the brunt of the lockdown will be greatly enthused at the prospect of getting GST refunds enabling quicker resumption of operations (when the lockdown ends),” MS Mani, partner at Deloitte India, said.
The pandemic itself is expected to wreak havoc on the finances of companies as well as countries. Over 80 government departments have been asked to restrict their expenditure for the first quarter — to 15% in some cases, and 20% in others.
In an order, the department of economic affairs (DEA) has detailed expenditure priorities for ministries, departments and institutions under three categories. The first category includes Union government arms dealing with crucial subjects such as health, agriculture, food and public distribution and pharmaceuticals. They have been asked to specify expenditure for the current quarter (Q1) of 2020-21 in advance and strictly adhere to it.
In the next category, over 30 ministries, departments and institutions have been asked to restrict expenditure to 20% of the budgeted amount, in Q1 of fiscal year 2020-21. They are the departments of post, fertiliser, financial services, revenue and some Union territories. The third category comprises 52 ministries and departments asked to restrict their Q1 expenditure to 15% of the budgeted amount. These include the ministries of coal, corporate affairs, earth sciences, mines, and minority affairs.
“At a difficult time, when people don’t have cash in hand and the exchequer is apprehending a major fall in revenue after economic activities came to a standstill because of the 21-day lockdown, the government has resorted to a two-pronged approach — expeditiously clearing all pending dues to infuse liquidity in the system and stopping unnecessary public expenditure [for the time being],” a financial advisor of the government said requesting anonymity.
The ministries and departments will require prior approval of the ministry of finance for any deviation from this guideline, the order said.
“Keeping in view the present situation arising out of COVID-19 and the consequential lock down, it is expected that the cash position of government may be stressed in Q1 (April to June 2020) of 2020-2021. Considering this, it is essential to regulate the government expenditure and to fix the Quarterly Expenditure Plan (QEP)/Monthly Expenditure Plan (MEP) of specific Ministries/Departments,” said the DEA order. DEA is an arm of the finance ministry.
