The impact of a slowing economy is showing up in government revenues with net direct tax collections in the first five-and-a-half months of 2019-20 making up just a third of the full-year target.
Net direct tax collections during April 1-September 15 grew just 5% to Rs 4.4 lakh crore, suggesting the government would have to raise more than double this amount over the next six-and-a-half months to meet the Budget estimate of Rs 13.35 lakh crore. For the full year, the Budget has targeted net direct taxes to grow 17.3%.
September 15 is a crucial deadline for direct tax collections as it marks the second — of a total four — instalments for advance tax payment and by when, companies are required to pay 45% of their tax liability. Companies pay 30% and 25% of their liability in the next two installments due December 15 and March 15 respectively.
The slowdown has translated into single-digit growth of 6% in advance tax collection up to September 15, as against 18% during the corresponding period last year. “Clearly, the slowdown in growth has started to reflect in tax collections,” an official, who did not wish to be named, told The Indian Express.
This below-than-expected growth in direct tax collections will also muddy the government’s fiscal math and pose a challenge in meeting its fiscal deficit target of 3.3% of the GDP. With refunds at Rs 1 lakh crore during the period, which is only 4% higher, gross direct tax collections have also risen by just 5.5% in the first five-and-a-half months.
Coming ahead of Friday’s GST Council meeting, the poor show on the direct tax side will render it next to impossible for the government to make any meaningful cut in GST rates despite increasing pressure from industry.
In August, GST revenues, though 4.5% higher year-on-year, had slowed to a six-month low of Rs 98,902 crore.
With the sharply slower revenue growth, the government’s direct tax targets are looking out of reach for the second consecutive year.
The government had missed its direct tax targets in the previous financial year by Rs 63,000 crore. In 2018-19, the government had initially estimated direct tax revenue at Rs 11.5 lakh crore, which was revised up to Rs 12 lakh crore. However, the actual direct tax receipts for 2018-19 was Rs 11.37 lakh crore.
Following the shortfall in direct tax revenue target for 2018-19, the government had reduced the tax targets for the current financial year. Direct tax revenue target has now been pegged at Rs 13.35 lakh crore for the current financial year, Rs 45,000 crore lower than the initial estimate of Rs 13.8 lakh crore in the interim Budget presented in February.
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