Concerns for Modi govt: Direct tax collection could fall short by Rs 65,000 crore
New Delhi: While the Interim Budget estimate of 13.5 per cent growth in gross tax revenue for FY20 — this is expected to arrive on a powerful ground of 17.2 per cent growth in FY19 (revised estimate) — seems like a bit too much optimistic, as the collection this year could be Rs 65,000 crore or 5.45 per cent less than the RE, because of the possible shortfalls in direct taxes alone.
If the long running mop-up trend provides any direction, some 65 per cent of the annual direct taxes gets collected in the first nine months of a fiscal year and the balance in the fourth quarter, the the personal income tax (PIT) collections in Q4FY19 could be Rs 1,85,150 crore, some Rs 52,000 crore lower than the revised estimate requires. The corporation tax (CIT) will may also experience a shortfall of Rs 13,000 crore against the RE.
As per the data released by the Controller General of Accounts (CGA) on Monday, the CIT collections in April-December FY19 was Rs 4,27,481 crore, while the PIT collections during the period was Rs 3,02,164 crore. The shortfall in gross tax collection could appear in the Centre’s net tax revenue as well; provided that other budget numbers is good, this will raise the fiscal deficit from the RE level of 3.4 per cent of the gross domestic product.
Fiscal deficit in the first nine months of the fiscal, as per Monday’s CGA data, was 112.4 per cent of FY19 BE and 110.6 percent of FY19 RE. Commenting on the CGA data, Devendra Kumar Pant, chief economist at India Ratings and Research stated, “The pressure is more visible on the revenue side rather than on the expenditure side. In order to meet FY19 (RE), monthly revenue receipts during January-March 2019 must be 1.8 times of average monthly collections in 9MFY19, which is unlikely to be achieved.”
The Interim Budget presented on Friday had predicted CIT collection to rise to 17.5 per cent in FY19 in comparison with last fiscal, while PIT is estimated to rise 27 per cent(REs). If these estimates are obtained, the direct tax to GDP would be 6.3 per cent — which would be the highest in 11 years since 2007-08.
The possibility of shortfall against the revised estimates is not just restricted to CIT and PIT; even though the GST collections are approximately Rs 1 lakh crore less than the budget estimate in the RE, which means that this revised estimate would be hard to achieve.
However, experts said that tax officials are patient enough to nudge big taxpayers in their respective jurisdictions to pay more taxes for a particular period to meet high targets. This excess amount is then adjusted in the next period while the target is shown to be achieved for the concerned period.
