Economic slowdown hits direct tax mop-up

India’s economic slowdown is impacting the Centre’s revenues with the net direct tax collection growing by a paltry 2.6.9% to Rs 5.58 lakh crore in April-November period of 2019-20.

While income tax collections in the period have grown by 7% to Rs 2.70 lakh crore, the corporate tax mop-up has shrunk by 1% to Rs 2.89 lakh crore in the first eight months of the current fiscal, data from Comptroller General of Accounts showed.

The Budget aim for net direct tax growth has been 17.4% for 2019-20.

But lower proceeds from corporate tax due to a 15% cut in September last year will lead to lower direct tax revenues.

The year-on-year collection of Goods and Services Tax (GST) too has slowed. Against the asking rate of Rs 1 lakh crore every month, the nine-month data till December showed the Centre has met the target only for four months.

A lesser than expected growth in tax collection is expected to impact the government’s fiscal math in a significant way. The just-released data of the Centre’s fiscal deficit showed that it rose to 115% of Budget estimates till November.

The Central Board of Direct Taxes (CBDT) is expecting a shortfall of at least Rs 50,000 crore by the end of the current fiscal year, according to highly-placed sources in the department.

“We are expecting a shortfall of Rs 1 lakh crore due to the cut in the corporate tax. The slowdown has also had an impact on the collections as the incomes are not growing.
The ministry will make sure I-T and GST do everything to get as close to the target as possible. They can do it by withholding big refunds, asking banks and companies to pay large advance tax in the last quarter,” a source in the CBDT told DH.

“As a result, the revenue receipts have been 50.1% of the budgeted estimate during April-November 2019, or 30 basis points lower than the corresponding period of the previous year.

‘‘Almost 70% of the actual fiscal deficit during the current fiscal has been funded by market borrowings. Market borrowings stood at 123% of the budget estimates
during April-November, 2019 as against 100% in the comparable period a year ago,” a Care Ratings analysis showed.