Equilization Levy: Indian version of 'Google Tax'?

Multinational Corporations have taken up the tax battle to the countries. For long concerns have been raised over dwindling tax base owing to artificial shifting of profits by the MNCs. Now these concerns have now been officially documented at the aegis of the OECD under its 'Base Erosion and Profit Shifting' (BEPS) Project. The BEPS Action plan of OECD describes this narrative in the following terms;

Over time, the current rules have also revealed weaknesses that create opportunities for BEPS. BEPS relates chiefly to instances where the interaction of different tax rules leads to double non-taxation or less than single taxation. It also relates to arrangements that achieve no or low taxation by shifting profits away from the jurisdictions where the activities creating those profits take place. No or low taxation is not per se a cause of concern, but it becomes so when it is associated with practices that artificially segregate taxable income from the activities that generate it. In other words, what creates tax policy concerns is that, due to gaps in the interaction of different tax systems, and in some cases because of the application of bilateral tax treaties, income from cross-border activities may go untaxed anywhere, or be only unduly lowly taxed.

Of particular disquietude is the affect on the tax base on account of digital transactions as, according to the OECD BEPS Action Plan, "digital economy is characterised by an unparalleled reliance on intangible assets, the massive use of data (notably personal data), the widespread adoption of multi-sided business models capturing value from externalities generated by free products, and the difficulty of determining the jurisdiction in which value creation occurs."

To thwart these tax-avoidance attempts and particularly those arising out of artificial shifting of residence in digital transactions, the international tax community has recently seen new levies particularly characterised as the 'Google Tax'. A number of countries have initiated attempts on bring in specific rules taxing corporations engaged in digital transactions amidst their jurisdictions such that they pay a fair share of tax on the income derives from the operations in such jurisdictions. United Kingdom (HMRC) has been the frontrunner being in the headlines for long and has explained its position publicly in a recently announted Policy briefing to this effect. Wikipedia entry on Google Tax informs that Australia and Spain have similarly announced promulgation of such taxation rules.

The Union Budget for 2016-17 presented by the Finance Minister on 29-Feb-2016 proposes to impose a similar tax branded as 'Equilisation Fee'. Chapter - 8 of the Finance Bill, 2016 (when enacted) would stand out as a sui generis levy on consideration earned by foreign companies for providing "online advertisement, any provision for digital advertising space or any other facility or service for the purpose of online advertisement and includes any other service as may be notified by the Central Government" to Indian businesses. The levy would be enforced indirectly i.e. by way of obliging the Indian businesses paying the foreign companies to deduct from the consideration the tax amount which currently stands at six percent of the total consideration payable for the service. The Memorandum accompanying the Finance Bill, 2016 explains the rationale for the new levy and its salient features in the following terms;

With the expansion of information and communication technology, the supply and procurement of digital goods and services have undergone exponential expansion everywhere, including India. The digital economy is growing at ten per cent per year, significantly faster than the global economy as a whole.
Currently in the digital domain, business may be conducted without regard to national boundaries and may dissolve the link between an income-producing activity and a specific location. From a certain perspective, business in digital domain doesn't seem to occur in any physical location but instead takes place in the nebulous world of "cyberspace." Persons carrying business in digital domain could be located anywhere in the world. Entrepreneurs across the world have been quick to evolve their business to take advantage of these changes. It has also made it possible for the businesses to conduct themselves in ways that did not exist earlier, and given rise to new business models that rely more on digital and telecommunication network, do not require physical presence, and derives substantial value from data collected and transmitted from such networks.
These new business models have created new tax challenges. The typical direct tax issues relating to e-commerce are the difficulties of characterizing the nature of payment and establishing a nexus or link between a taxable transaction, activity and a taxing jurisdiction, the difficulty of locating the transaction, activity and identifying the taxpayer for income tax purposes. The digital business fundamentally challenges physical presence-based permanent establishment rules. If permanent establishment (PE) principles are to remain effective in the new economy, the fundamental PE components developed for the old economy i.e. place of business, location, and permanency must be reconciled with the new digital reality.
The Organization for Economic Cooperation and Development (OECD) has recommended, in Base Erosion and Profit Shifting (BEPS) project under Action Plan 1, several options to tackle the direct tax challenges which include modifying the existing Permanent Establishment (PE) rule to include that where an enterprise engaged in fully de-materialized digital activities would constitute a PE if it maintained a significant digital presence in another country's economy. It further recommended a virtual fixed place of business PE in the concept of PE i,e creation of a PE when the enterprise maintains a website on a server of another enterprise located in a jurisdiction and carries on business through that website. It also recommended to impose of a final withholding tax on certain payments for digital goods or services provided by a foreign e-commerce provider or imposition of a equalisation levy on consideration for certain digital transactions received by a non-resident from a resident or from a non-resident having permanent establishment in other contracting state.
Considering the potential of new digital economy and the rapidly evolving nature of business operations it is found essential to address the challenges in terms of taxation of such digital transactions as mentioned above. In order to address these challenges, it is proposed to insert a new Chapter titled "Equalisation Levy" in the Finance Bill, to provide for an equalisation levy of 6 % of the amount of consideration for specified services received or receivable by a non-resident not having permanent establishment ('PE') in India, from a resident in India who carries out business or profession, or from a non-resident having permanent establishment in India.
Further, in order to reduce burden of small players in the digital domain, it is also provided that no such levy shall be made if the aggregate amount of consideration for specified services received or receivable by a non-resident from a person resident in India or from a non-resident having a permanent establishment in India does not exceed one lakh rupees in any previous year.
To provide certainty and to avoid interpretational issues, it is also proposed to define certain terms and expressions used therein. Further it also proposes to provide for the procedure to be adopted for collection and recovery of equalisation levy.
In order to provide for the administrative mechanism of the equalisation levy, it also proposes to provide for statutory authorities and also prescribes the duties and powers of the authorities to administer the equalisation levy. In order to ensure effective compliance, it also proposes to provide for interest; penalty and prosecution in case of defaults with sufficient safeguards. 

This new tax has already been dubbed as the Indian version of Google Tax by the print media. See [1] [2] There are certain important aspects of the new tax;

• The tax is on the gross amount earned by the foreign companies. Therefore it is not one akin to a standard income tax which is on profits i.e. permits deduction on account of expenses from the revenue earned.
• The tax would be administered by way of provisions termed as 'tax collection at source'. Thus the manner of collection of this tax is akin to those cases which are considered peculiar to be administered owing to the tax-base being scattered / unorganised. Currently there are very few cases to which tax collection at source provisions apply.
• The proposed provisions do not indiciate a fixed time-line to commence the tax application and leave it to a subsequent notification which will announce the date of the levy. Ordinarily income tax applies from first date of assessment year i.e. 1st April of a year. However since this is a tax collection on consideration earned by foreign company (which will not be assessed but the payer will be required to comply with the law), there is a possibility that this new tax can be enforced even during the year.

While the finer nuances of the levy will be known only at a later date when it becomes operational, it is indeed of particular significance to note that Indian tax laws are matching up the Indian trends.

New laws on the anvil: The Budget proposals

The annual ritual of the Government of India presenting its plans and outlook for the upcoming Fiscal Year took place on the 28th of last month, with the Finance Minster delivering his Speech and presenting in the Parliament the Budget for the Year 2011-12. While we are deviating four our stand on earlier Budgets, wherein we put-forth in a pre-budget predictive exercise, our proposals and aspirations from the Budget, we have undertaken an extensive review of the Finance Minister's speech and other documents to bring forth to our readers the changes proposed in the legal scenario of the country.

The Finance Minster, presenting his outlook for the upcoming year, has presented and offered a number of new legislations and also proposed amendments in the earlier ones. In a brief note, we have captured these in the following bullets;

1. Public Debt Management Agency of India Bill - scheduled for the next Financial Year - as an independent Debt Management Office in the Finance Ministry;
2. A Constitutional Amendment for introduction of comprehensive Goods and Service Tax and the draft legislation thereon;
3. Pension Fund Regulatory and Development Authority Bill - a new revised Bill - as a part of Financial Sector Reforms;
4. Factoring and Assignment of Receivables Bill - as a part of Financial Sector Reforms;
5. The Companies Bill - received from the Parliamentary Standing Committee;
6. National Food Security Bill - guaranteeing food security for all citizens.

Further, amendments have been proposed in a number of existing laws, namely;

1. Fiscal Responsibility and Budget Management Act, 2003 - laying down the fiscal road map for the next five years;
2. Insurance Laws (Amendment) Bill;
3. Life Insurance Corporation (Amendment) Bill;
4. Banking Laws Amendment Bill;
5. State Bank of India (Subsidiary Banks Laws) Amendment Bill;
6. Recovery of Debt for Banks and Financial Institutions Act, 1993;
7. Securitization, Asset Reconstruction and Enforcement of Security Interest Act, 2002;
8. Indian Stamps Act, 1899.

The Budget speech has also proposed the for the constitution of the following committees, which we envisage into resulting into further legislations;

1. Task Force on system of direct transfer of subsidy for kerosene, LPG and fertilisers;
2. Financial Sector Legislative Reforms Commission;
3. Group of Ministers for reconciliation of environmental concerns.

We can only hope that the promises and assurances of the Minister are carried out in spirit, such that the legal structure receives the requires reforms at the earliest. 

Budget 2010-11: What to expect?

Now when the Budget for the Financial Year 2010-11 has been slated to be announced by the Finance Minister, Government of India on the upcoming 26th of February, I pondered over the issue and decided against not writing on it. Given the persistence of our friend and also the importance of the issues at stake in the Budget this year, I thought of putting in the outlook at this end for the year. 

The first and foremost question is whether the 'Direct Tax Code' will be introduced in this year. Promising to revamp the entire structure of Direct taxes in India (subsuming inter alia the Income Tax, Wealth Tax, Dividend Distribution Tax) and proposing to change the legal structure in which Double Taxation Avoidance Agreements work in the country, the Code has been hailed by the Finance Minister as an exercise to "improve the efficiency and equity of our tax system by eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the tax base". Unveiled on 12th August last year, sufficient breathing time has been given to the industry and general public at large to make their representations against any of the provisions in the proposed Code which they seek to pitch up for amendment. It is also made known from the commercial circles that the consultative process is long over and the Ministry officials are light-lipped over the issue as to whether it would be introduced in this Budget. The introduction of the Code in the present Budget would imply that all payments made and transactions undertaken from 1st April onwards would be subsequent to the provisions of the Code in as much as they would be taken in the financial year 2011-12. 

However, one thing is for sure. If the Code is introduced in this year's Budget, it will revolutionize the way in which industry and citizens work in India. The Code brings along with it the features which are peculiar to a developed nation. The taxation structure has been worked on the principle of ability to pay principle and thus while it provides the requisite relief to those in the lower-rungs, those higher up in the economic strata will be severely called upon to contribute to the exchequer in the form of taxes. On top of that, the Code also contains stringent Anti-Avoidance Rules which can strip-off any legal construction of a potential tax-avoidance scheme to make liable to tax such transactions which on the face of it are tax-compliant. 

Moving on, another possibility is the onset of the Goods and Service Tax (GST) in the Budget. The possibility, however, is faint in view of the fact that important Constitutional changes are required to be made and also the critical issues require an agreement between the State Governments as well. We had written on GST in detail earlier and so would refrain from commenting on its again. Nonetheless the Direct Tax Code and the GST combined carry the potential to trigger the economic growth of the country in as much as the emphasis is to tax the cream (profits) while leaving the nurturing milk (investments) for being utilized in the progressive growth of the country. If someone envisaged India to be a developed country by 2020, then it is essential that either in this or in any case by the next Budget both the Code and GST become operational.

To make it clear as to why I am discussing the Code and GST in such detail is because of the fact that sooner of later (i.e. in this year or the next) both of these are bound to get implemented given the firm resolve of this Government and the clear-headed policy making being undertaken at the North Block. In this background it is but obvious that the Budget in this year (if it does not carry either of these) would only be a stop-gap arrangement for a year making the way clearer for these two significant legislation. 

And now that I have played my part, I would take liberty to discuss the other issues which are the possibility in this Budget, as my close friend Sumit Agrawal has put, which he claims to be "a discussion based on various media reports and public information". He inter alia states as under;

1. There is an expectation that current individual income tax exemption limit (1.6 lakh rupees for men and 1.9 lakh for women taxpayers) could extend to 2.0 lakh for men and 2.3 lakh for women tax payer. This is expected from the Budget Speech, given the fact that Fringe Benefit is now taxable in the hands of the salaried employee, not raising the slabs significantly will increase the tax burden salaried class. Increasing inflation is another issue which is expected to be factored through this increase.
   
   
2. Deduction for investment in Mutual Fund ELSS Scheme and Insurance Policies to take benefit of section 80C of Income Tax may be reviewed. On the other hand, the limit for tax exempt investments under Section 80C is expected to increase from Rs. 1,00,000 to 1,50,000/-, though the industry seems to be demanding and pushing for more.
   
   
3. The government may come out with a detailed action plan for disinvestment through offloading its stake in many Public Sector Undertakings (PSUs) which would ensure returns for exchequer and assist government in reducing its deficit. There seems to be plans of offloading govt. stake in NMDC and Satluj Jal Vidyut Nigam. However, disinvestment in NTPC and REC is already on track whereby REC is set to come out with an offer for sale of 42,933,000 equity shares by the President of India, acting through the Ministry of Power, Government of India. State-run Satluj Jal Vidyut Nigam (SVJN) may come out with an IPO sooner.
   
   
4. There is also an industry demand of increase in the gratuity limit of Rs 350,000 to 10,00,000/.
   
   
5. In contrast to last year's reduction in excise duty, this year excise may be increased in the range of 1 to 2%. This would mean possible increase in prices of coffee, white goods (cars, refrigerators etc.)
   
   
6. Securities Transaction Tax is now charged at the rate of 0.125% both on the buyer and the seller for equities in the case of delivery-based transactions, a paltry 0.025% for day traders and 0.017% for the derivatives segment. Traders demand that it should be left unchanged. 

One may also take note of the recently published Annual Economic Check-up of India conducted by the IMF which makes interesting observations facing India on the economic front. Nonetheless, we are keeping our fingers crossed for the 26th. 

Predictions on the Union Budget 2008-09

I write this post as a follow-up to my previous post on Unravelling of the Budget Making process and also upon the request of a very close friend of mine who inspired me to this idea. The subject and content of this post might not fall within the strict confines of the term law as it is properly understood, yet it is of vital importance to law in the sense that it affects a number of laws and has a specific constitutional importance in the state-of-affairs of the national economy as a whole. Therefore I commence upon this ambitious crusade to comment upon what I expect to be covered in the Budget Statement for 2008-09, to be presented on the coming 29th of February and also on certain issues which I anticipate to be dealt with in the same. However, instead of filling this post with stats and figures, I would only go only to make an analysis of the major issues and that too on a policy perspective.

It is in this line that in the upcoming budget I expect a further reduction in the number of varied exemptions under the Income Tax Act, 1961, as Mr. Chidambaram would go on to follow his agenda of expanding the tax base. These sops, which have always been a hornet's nest (criticized for distorting the system and called for to ensure fairness to those to require to be promoted to bring them to the economic mainframe), are ultimately bound to disappear in a big way as India seeks on its mission to seek dependence on direct taxation and move from indirect taxation, as a mark of a developed nation. However, removal of such exemptions would also mean a corresponding rise in the non-taxable slab (currently Rs. 1,10,000/ for men and Rs. 1,45,000/- for women) upon which a close friend informs the the Ministry if mulling over the possibility of raising it to Rs. 1,50,000/-.

On the corporate tax front, as another friend informs, major changes are being considered by the Ministry. There are chances that (i) Thin Capitalization Rules, (ii) Loan Relationship Rules, and (iii) Controlled Foreign Corporation Rules may as well be introduced in the Budget. [These issues being highly technical, I am expecting myself to find some time to write about them in a separate post]. Given the fact that Indian tax system has closely followed the UK tax systems, the chances of these changes being brought in the Indian tax code are in any case high, though the timing may vary. Further, the Anti-Avoidance Rules are also an area whereon the FM can mull over to avoid revenues escaping tax liability.

In line with its commitment with the WTO, it might not be a surprise if there is a continuation of the trend from last year, and there is a further reduction in customs duties this year as well. This might come as a hard blow to the revenue targets but then I think this would be compensated by the increasing contribution to the service tax front, regarding which I can see more services being brought within the service tax net.

Then on his promised transition of the indirect tax regime from one of state-retail sales tax and central service tax to a consolidated 'Goods and Service Tax' by 2010, I can forthwith see changes (may be even a further reduction in CST tax rate) being introduced in the structural pattern of taxation of goods and services. Though I am aware that this is more so better dealt with as a separate constitutional issue rather than to be provided for in the Union budget but then the preparations would have been done under Budget as well and therefore I would not be surprised to find provisions illuminating the path to this goal.

With hue and cry from the industrial quarters and an archaic piece of legislation on the subject-matter, I think the FM would go on to a bit on the stamp duty front as well. I am sure we all appreciate the role that stamp duties play especially when the amounts run in somewhere between six to ten digits in high value transactions and therefore stamp duty acts a potent barrier to the implementation of commercially viable options based upon their viability alone. In a developing economy, with constant changes in ownership of economic assets, high stamp duties are always indicators of negative vibes and run counter to the growth perspectives.

Then, in principle, I am sure the FM would take stock of the liquidity concerns and rising inflation and would extent a warm hand to the industrial sector. This might need a bit of nourishing by extending sops to the industrial community. But then this would not come in way of the subsidy and promotion programme for agriculture, wherein the trends have always indicated a rising contribution by the union government to the improvement of the productivity on the food stability front as well.

Considering the fact that the stock exchanges have seen a beating of the investors and have really gone up and down like a merry-go-round, I would not be surprised if the Securities Transaction Tax is raised up again. I am not sure about the capital gains front, but the there might be change in the tax rates here as well (though the changes for this are really slim). As for the employees, hitting the middle class hard as usual, more perquisites may as well be brought within the Fringe Benefit Tax front.

Having a tussle with the Ministry of Commerce over a year now and most prominently because of the strengthening of Rupee in dollar terms, I am expecting the FM to go sweet over the exporters and bring in a special package for the exporters. Further, the Special Economic Zones (SEZs) coming in line of fire from all across the country, I expect atleast a policy statement from the FM in his budget speech (if not a change in the provisions) on the manner in which they would be handled in future. This has become necessary in the wake of the increasing concerns and instances of farmers being deprived of their properties for making way for the SEZs.

Then I am expecting (and hoping that this would not be missed by the FM) more expenditure being allocated towards development of infrastructure, especially the renewed interest in airports and sea-ports and roads , if India really has to come anywhere close to a double digit GDP growth-rate.

Further readings:

1. Yahoo news on Budget 2007-08
2. BusinessMapofIndia's article

Unraveling the Indian Budget making process

Come February and all eyes focus on the Finance Minister. And why should they not be? After all he is about to present before the Parliament the sign piece of the economic paradigm for the country for the upcoming financial year. This year the same holds true but then again with Mr. Chidambaram set to present the budget on 29th February, he would equal a number of interesting statistical records. [click here for more on these records] However its not the such records which make the Budget becoming the anxious lime light of everyone. It is the impact which the budget has that is of relevance; for it seeks to affect not only the business gentry but transcends the economic structure to come to affect one and all, either through the regime of changes brought in taxation or the through the promotion of one or more programmes of the welfare state. Therefore I thought why not have a run down on budget on this blog, which I plan to do in a couple of posts; the first dealing with the various aspects of the budget making process while the second one on the predictions of the upcoming budget for 2008-09.

Spoken in purest of terms, a budget is the financial statement of the year. This translated in national terms comes to mean the financial statement of the year of a national economy, entailing the estimated earnings and proposed expenditure during the financial year. The Indian financial year starts from 1st of April each year and ends on 31st of March the following year. It is for each of this period of 12 months that a budget is presented, outlining the planning done on the financial scale for the nation. It boils down to the extent of how each Rupee is earned by the government (i.e. proportionally from various sources) and how each Rupee is spent by the Government (i.e. on various itemized and non-itemized ingredients upon which the government spends).

BUDGET MAKING PROCESS

Traditionally it is understood that the Budget would be presented on the last working day in February of a calendar year for the upcoming Financial Year starting from 1st of April. This would entail allowing the business and commercial practices a leverage of one month to set their practices straight and adopt themselves to the changes proposed in the budget document. However, for a variety of reasons, more often than not the Budget has not been presented on the last working day of February, which however is of little consequence for the date of presentation does not make any difference.

I. Finance Ministry up to the task

The Budget is prepared at the behest of the Union Government by the Ministry of Finance which is responsible for arranging the fiscal affairs of the Union Government in the country. This Ministry of Finance is divided into five departments (i) Department of Economic Affairs, (ii) Department of Expenditure, (iii) Department of Revenue, (iv) Department of Disinvestment, and (v) Department Financial Services. Each of these departments are further classified into divisions and it is the 'Budget Division' under the Department of Economic Affairs, which is responsible for the preparation of the Union Budget. But then it must be noted that making budget is not the only function of this division and it has other responsibilities as well. [click here for full list of functions of the division]

The basic layout upon which the Budget division operates during the financial year in the run-down to the Budget can be summarized as under;

- The Division internally reviews the progress of the economy and the various issues to be dealt; 

- The Division calls forth the opinions of the prominent economic groupings of the country, such as the Confederation of Indian Industry (CII), NASSCOM, National Council of Applied Economic Research (NCAER), etc. besides the top entrepreneurial brass of the country which is invited by the Finance Minister himself to hold consultations before the budget in order to appraise himself with the ongoing concerns at the top circles of Indian economy; 

- Meanwhile data is collected by the various departments of the Finance Ministry upon various aspects of the economics, a sort of progress-report-card of the country giving vital insight into the various sectors of the economy and their movement across the previous years. As a new trend, this data is also began to be published a few days prior to the Budget, as a run-down to the main show and is called as the Economic Survey. [click here for 2006-07 Economic Survey] 

Having undergone this process, the Division forms a policy opinion on the changes which it thinks are required in the economic mainstream and incorporates all these changes in the form of a legal text (known as the Finance Bill) which is presented by the Finance Minister is an commonly understandable speech (known as the Budget Speech). Both these documents form an essential part of the budget and are equally important for while the administration and courts enforce the Finance Act (when it is passed by the Parliament, for more, read further) whereas in case of any ambiguity as to the purpose of ambit of any particular part or provision of this Finance Act, the Budget speech is often resorted to as a interpretative means for understanding the ambiguous provision.

Additionally, the Budget division is also required to prepare a statement in terms of the Fiscal Responsibility and Budget Management Act, 2003 (surprisingly wikipedia has no entry on this important legislation); issue biannual statements on the public external debt of the country; publish annual reports on the state of affairs of the Ministry, and work on promotion of small savings in the country. All these documents are presented soon or later near around the budget document itself for they provide vital insight into the understanding of the budget on a whole in the national context.

II. Parliamentary Scrutiny

Once the budget has been prepared and presented in the Parliament, similar to the ordinary law making process, it is presented for voting and approval before the Parliament. The importance of approval by the Parliament is two-fold. Firstly it reflects the satisfaction of the Parliament on a whole upon the budget presented before them for approval and thus allows the democratic process of the law being made by the people for the people through elected representatives, to set into motion. Secondly, non-approval of a Budget would imply that the government has lost the confidence of the majority in the Parliament and this may even lead to the grounds for removal of the existing government and formation of a new one, though such instances are absolutely rare.

On the appointed day in the Parliament (an entire Parliamentary session is devoted to the Budget presentation and approval process and is understandably known as the 'Budget Session') the Finance Minister presents a speech and the 'Finance Bill' with a host of other documents (read the first part above for more details). Once the document is read out by the Finance Minister, it is submitted for voting before the Parliament, where it might be approved and passed as it is presented or with modifications suggested by members of parliament, which the government might or might not agree to. Once approved, the Finance Bill is sent to the President for his/her approval and thereon when the President signs it, it become the Finance Act, meant to be in force only but for a full financial year. 

Further Readings;

1. Links to Budget 2007-08
2. Video of Budget 2007-08 presentation in Parliament
3. Hindu's critique on Budget Making
4. EPW article on lack of democratic values in Budget Making
5. A slide-show on the budget making process.
6. Rediff's article on Budget preparation
7. Some more facts on budget preparation 

Post-Script Rejoinder

After writing this post, the Finance Ministry of Government of India unveiled the Budget Manual. This document, running over 200 pages, gives in the current context the entire process which is undertaken for the formulation of the Union Budget as also giving reference to various procedures and protocols followed by the Government of India in this regard. It is stated that  the Manual "unravels the detailed processes involved in the entire gamut of Budget preparation" while it also provides "deeper understanding to the officials of Ministries/Departments of their roles and responsibilities with respect to preparation of documents and statements included in the Budget".

Just to give our readers a glimpse, we are extracting the a preliminary insight into the various chapters of the Manual, which provides as under;

Chapter I is introductory in nature and brings out the meaning and importance of Budget, the important Constitutional provisions related to Budget, the various Budget documents and their composition and the recommendations of the Estimates Committee on the Form and Contents of Demands for Grants. 

Chapter II of the Manual deals with the Organizational aspects bringing out the roles and responsibilities of the Parliament and the Parliamentary Committees and the responsibilities of various wings of the Executive in the Budget making process. 

Chapter III of the Manual deals in a comprehensive manner with the Structure of Government Accounts and the classification system. This is very crucial for any budgetary process since the budgetary and accounting classifications follow a common pattern and their clear understanding is crucial for any analysis on Budget and the related provisions. A detailed analysis of the three Funds viz. the Consolidated Fund of India, the Contingency Fund of India and the Public Accounts of India has also been dealt with in this Chapter.

Chapter IV brings out the entire chain of Budget preparation process right from the issue of the Annual Budget Circular. It deals in great detail with the process of estimations relating to receipts and expenditure and the consequent compilation of the Statement of Budget Estimates. All the related formats of estimation have been dealt with briefly in this Chapter in a sequential manner. Chapter IV also deals with the process of Pre-Budget meetings and the various instructions relating to furnishing of information by the Ministries/Departments for the preparation of Budget Statements. 

Chapter V of the Manual brings out the calendar of Budget activities and timelines including those in the Parliament. This Chapter also brings out in minutest detail the duties and responsibilities relating to various Budget documents/statements explaining alongside the process of their compilation. The checklists used internally for the preparation of various Statements in the Budget documents have been made a part of this Chapter for easy reference and understanding by all users. This Chapter also brings out the process of Budget related security arrangements including the system of Lock-in and the processes and check-lists for the preparation of State Budgets while under President Rule. 

Chapter VI apart from others outlines the role of Departments in spending and control, cash management and the much in use processes of Re-appropriations, Supplementary Demands for Grants and the related provisions in the General Financial Rules and the Delegated Financial Powers Rules. This Chapter also deals with some common Budget related irregularities which can be avoided by taking precautionary measures. 

Chapter VII of the Manual brings out the main Budget related Reporting and Evaluation processes including the Act provisions, guidelines and instructions relating to FRBM Statements, Outcome Budget, Mid-term Evaluation of Plan Schemes, Audit Reports of C&AG and the reviews by the Public Accounts Committee. The Manual also includes a number of Annexes wherever required for providing a more holistic perspective on the subject matters dealt with in the related Chapters.

We hope this Manual would give vital insights to our readers.