Centre to miss tax collection targets

The central government will miss its tax mop-up targets for both direct and indirect taxes for the financial year 2018-19, finance ministry officials said.

The ministry had pegged the direct and the indirect tax collection targets at Rs 12 lakh crore and Rs 10.45 lakh crore, respectively, as per the revised Budget estimates.

"It is almost clear now that the budgeted tax collection targets for both direct and indirect tax will not be met. We expect the indirect tax shortfall to be around Rs 50,000 crore during 2018-19. Of this, Rs 30,000-35,000 crore is likely to be on account of Goods and Services Tax (GST), the target for which is pegged at Rs 6.44 lakh crore for the year. The excise mop-up target of Rs 2.60 lakh crore, too, will see a shortfall, of which Rs 10,500 crore is likely to be due to a reduction in excise duty on petroleum products by Rs 1.50 per litre. The customs collections may, however, overshoot its Rs 1.30 lakh crore target," a revenue department official said.

Due to muted collections, the government had revised downwards the GST target from Rs 7.44 lakh crore to Rs 6.44 lakh crore in the interim Budget. The total indirect tax collection target, which includes GST, excise and customs duties, was revised from Rs 11.18 lakh crore to Rs 10.45 lakh crore.

Any shortfall in GST collections will not only impact the Centre's finances but also the state finances in terms of lower tax devolution and grants-in-aid transfers.

On the direct tax side, which includes corporate and personal income tax, the Income-Tax Department had collected about Rs 10.27 lakh crore, which is 85.6% of the revised estimate of Rs 12 lakh crore, as on March 27. Central Board of Direct Taxes (CBDT), the apex policymaking body of I-T department, had last week written to the principal chief commissioners to take all possible actions to meet the collection target.

"We are trying every possible method to collect direct taxes for the current fiscal and reach closer to the original Budget target of Rs 11.50 lakh crore, if not exactly meet it. The unrealistic revised target of Rs 12 lakh crore is impossible to meet. There are some last-minute entries which get reflected in a few days. The real position on total collections will be known by April 4," said another finance ministry official. The last date for payment of personal income and corporate tax for the financial year 2018-19 was March 31.

The offices of I-T department, as well as Central Board of Indirect Taxes and Customs (CBIC), remained open on Saturday and Sunday to assist the taxpayers. The CBDT had asked its field offices to facilitate filing of tax returns by opening additional counters on the weekend.

Meanwhile, the I-T department is being criticised for being harsh on taxpayers in order to plug its revenue shortfall. Many Chartered Accountant (CA) associations have written to the Prime Minister's Office (PMO) and the finance ministry to rein in tax officials from taking action against taxpayers. A communique signed by the CA associations of Mumbai, Ahmedabad, Surat, Karnataka and Lucknow raised concerns over taxman raising undue demands, particularly in case of disputed appeals where the taxpayers have a chance in succeeding in the appeals.

The shortfall in revenue collections is expected to impact the gross tax revenue, which is pegged at Rs 22.48 lakh crore.

According to experts, the subdued mop-up will have an impact on the fiscal deficit even as the government tries to cover the gap between its total revenue and total expenditure through higher proceeds from disinvestment and non-tax routes such as dividends.

"There will be a net impact on the fiscal deficit. It might turn out to be higher than the revised Budget target of 3.4% of the gross domestic product unless the government makes up for the gap by reducing its expenditure along with the higher proceeds from disinvestment and dividends from public sector undertakings," said D K Srivastava, chief policy advisor at EY.