The historical mop-up trend suggests that 65% of the annual direct taxes get collected in the first nine months of a fiscal year and the balance in the fourth quarter.
The Interim Budget estimate of 13.5% growth in gross tax revenue for FY20 on the back of a robust base of 17.2% growth in FY19 (revised estimate or RE) is somewhat too optimistic, says. Report in FE. According to the report, the collection this year could actually be Rs 65,000 crore or 5.45% less than the RE, due to a possible shortfall in direct taxes alone.
The historical mop-up trend suggests that 65% of the annual direct taxes get collected in the first nine months of a fiscal year and the balance in the fourth quarter. That is to say that personal income tax (PIT) collections in Q4FY19 could be Rs 1,85,150 crore, about Rs 52,000 crore less than what the revised estimate requires. The corporation tax (CIT) may also witness a shortfall of Rs 13,000 crore against the RE, the report says.
The data released by the Controller General of Accounts recently shows that the CIT collections (net of refunds but before devolution to states) in April-December FY19 was Rs 4,27,481 crore, while the PIT collections during the period stood at Rs 3,02,164 crore. The report says that this shortfall in gross tax collection (net of refunds to taxpayers bit before devolution to states) could reflect in the Centre’s net tax revenue also; if we assume other budget numbers will hold good. This will then increase the fiscal deficit from the RE level of 3.4% of the gross domestic product.
According to the CGA data, fiscal deficit in the first nine months of the fiscal was 112.4% of FY19 BE and 110.6% of FY19 RE. The report quoted Devendra Kumar Pant, chief economist at India Ratings and Research as saying, “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 has to be 1.8x of average monthly collections in 9MFY19, which appears difficult to achieve.”
The Interim Budget presented on February 1, estimated CIT collection would grow 17.5% in FY19 compared with last fiscal, while PIT is estimated to rise 27% (REs). That means if these estimates are achieved, direct tax to GDP would be 6.3% — the highest in 11 years since 2007-08.
However, the possibility of shortfall against the REs is not limited to CIT and PIT. Though the GST collections are estimated to be Rs 1 lakh crore less than the budget estimate in the RE, it is feared that even this revised estimate could be hard to meet.
However, experts say that tax officials with their time-tested practice of nudging bigger taxpayers in their respective jurisdictions to pay more taxes for a particular period to meet high targets, could manage to tide over the shortfall. While showing that the target has been achieved for the concerned period, the excess amount is adjusted in the next period.