Top officials of the tax department have been called for a meeting here on Friday to assess revenue collections, especially in light of the recent dip in revenues from goods and services tax (GST) that slipped to Rs 83,346 crore for October — the lowest since the July 1 rollout of the indirect tax. The government will gauge the trend in revenue receipts and look at ways to increase tax collections and compliance levels at the meeting to be chaired by finance secretary Hasmukh Adhia, official sources said.
With just two months remaining for the presentation of the Union Budget for 2018-19, the government will also factor in estimates on indirect tax receipts for the budget, which is a challenging proposition this year given the GST rollout three months after the start of the fiscal and the uncertainties in the collection trend on the indirect tax side. The finance ministry is considering tabulating revenues from GST under the head of total indirect tax revenue, instead of giving a detailed breakup, an official close to the development said.
The finance ministry, on November 27, had said the decline in GST revenue in October is mainly on account of utilisation of already-collected Integrated GST (IGST) as credit against Central GST (CGST) and State GST (SGST), along with a lower tax incidence on items in the GST regime. The ministry had also said that the tax compliance may not have been up to the mark on account of deferment of implementation of some of the main features of GST such as, matching of returns, e-way bill and reverse charge mechanism.
About 50.1 lakh returns have been filed for the month of October till November 26, lower than 57.3 lakh returns filed for September, 58.9 lakh for August and 58.7 lakh returns for July. The government had garnered Rs 92,150 crore as total GST revenue for September (as on October 23); Rs 90,669 crore for August (as on September 26) and Rs 94,063 crore for July (as on August 31).
The Centre is facing uncertainties not only on account of indirect tax revenue but also non-tax revenue in view of lower surplus transfer from the Reserve Bank of India (RBI).The RBI in August announced that it will transfer Rs 30,659 crore as surplus to the government for the year ended June 2017, less than half the amount transferred last year.
Lower revenue collections and rise in expenditure led to the Centre’s fiscal deficit at the end of October hitting 96.1 per cent of the full year budget estimate. During the same period of 2016-17, the deficit stood at 79.3 per cent of the target. The rise in deficit has raised concerns over the government’s ability to stick to its fiscal deficit aim of 3.2 per cent of GDP by March-end 2018 without pruning expenditure. Economic Affairs secretary Subhash Chandra Garg had said in October that the government hopes to stick to the fiscal deficit target but will take a final view on the number in December.
As for accounting of overall GST collections in the budget, the government is likely to assume half of IGST revenue as Centre’s receipts instead of its utilisation against IGST or CGST or SGST credit, in that order. Also, the government would exclude compensation cess from the overall receipts in Budget as it flows directly to state coffers, the official said.
“We are still assessing how to account for GST in the Budget. We are looking at dividing tax revenue receipts broadly under the two heads of direct taxes and indirect taxes. For the sake of convenience, we will assume half of IGST revenue for Centre’s share and exclude compensation cess from Budget estimates,” the official said.
In the Budget for 2017-18, the government had estimated indirect tax revenue for the whole financial year without taking into account the GST rollout from July 1. For the next year, however, the government would need to account for GST as well as indirect tax receipts from products which have been kept outside its ambit such as alcohol for human consumption and petroleum products. The government has estimated gross tax collections of Rs 19.11 lakh crore for this fiscal, including Rs 12.27 lakh crore of Centre’s net tax revenue. An amount of Rs 2.88 lakh crore is estimated to be collected as non-tax revenue in this financial year.
A finance ministry spokesperson did not reply to queries seeking comments for the story.