Less than a week before the end of this financial year, the government is struggling to meet its tax collection targets with direct tax mop-up at only 85.1 per cent of the revised estimate of Rs 12 lakh crore in addition to a likely shortfall on the indirect taxes front as well.
Flagging these concerns, the Central Board of Direct Taxes (CBDT) in a missive to field formations on March 26 termed the negative growth in collections over last week as an “alarming situation which needs immediate attention” and has asked them to “take all possible actions” to achieve the collection targets.
Even though the government has surpassed its disinvestment target, a slippage on tax revenues ranging from Rs 50,000 crore-Rs 1 lakh crore could lead to a slippage in fiscal deficit, which was already revised upwards in the Budget to 3.4 per cent of the GDP from the initial aim of 3.3 per cent of GDP.
The missive states that the government, as on March 23, has collected only Rs 10.21 lakh crore, which is 85.1 per cent of the revised estimate of Rs 12 lakh crore, adding that the analysis by the tax department indicates worsening trend of negative growth in regular collections at (-) 6.9 per cent as against (-) 5.2 per cent in the last week. “…it is seen that as against the budget collection target of Rs 12,00,000 crore, only 85.1 per cent of the target at Rs 10,21,251 crore has been collected as on 23.03.2019. The minor head-wise analysis indicates worsening trend of negative growth in regular collections at -6.9 per cent as against -5.2 per cent in the last week. This is an alarming situation which needs immediate attention,” the CBDT has written to its field formations on Tuesday.
The Board has asked its field formations to take all possible actions urgently, especially for recovery of arrears and current demand, to meet the targets. “You are aware that regular assessment tax is benchmark of performance as it is based upon quality of demand raised which can further be converted into actual collections. Board has discussed strategies through various communications with you and it was expected that by this time your strategies would have succeeded resulting into improved collections. However, the figures of collections give a different account,” it said.
The missive further stated, “You must, therefore, as discussed telephonically also, take all possible actions urgently, especially with respect to recovery of arrears and current demand, so as to achieve the targets for collection.”
Shortfall may lead to further slippage in fiscal deficit target
Even as the government revised down the GST target for this financial year, there was an upward revision in direct tax collections target by Rs 50,000 crore to Rs 12 lakh crore in the Budget for 2019-20. The revised direct tax target, which factors in a growth rate of 19.8 per cent as against the initial goal of 14.8 per cent, has proven to be stiff. The shortfall in direct tax revenue in addition to the indirect tax could lead to a further slippage in fiscal deficit target.
The income tax department has also asked banks to deposit their TDS (Tax Deducted at Source) for March by March 31, earlier than the due date of April 7. This is, however, not the first instance of banks being asked to advance their TDS payments since even last year the CBDT had instructed the same to banks. A government official said this could yield an amount of Rs 8,000-10,000 crore before the closing of this financial year.
The growth rate of direct tax collections was revised up to 19.8 per cent rate in the Budget from 14.8 per cent initially, translating into upward revision of Rs 50,000 crore in the target, which officials say has been steep and made the targets tough to meet. Two senior government officials said there could be some shortfall on the indirect tax front as well, as much as Rs 50,000 crore, even though the central government’s GST revenue target was revised down by Rs 1 lakh crore to Rs 6.44 lakh crore in the Budget.