Almost two years after the shift to the goods and services tax (GST) regime, tax collections continue to underwhelm. For 2018-19, the Centre had initially pegged the central goods and services tax (CGST) collections at Rs 6.03 lakh crore. This was subsequently lowered to Rs 5.03 lakh crore in the interim budget, as revenue during the year came in well below expectations. But, actual collections were even lower at Rs 4.57 lakh crore, according to recent data released by the Controller General of Accounts (CGA). The extent of the shortfall is worrying. Based on the CGA data, CGST collections would have to grow by 33.5 per cent in FY20, for the interim budget target of Rs 6.1 lakh crore to be met. And though there has been a modest improvement in collections in the first two months of FY20, the interim budget target appears to be too optimistic, going by current trends.
At the aggregate level, total GST collections have been pegged at Rs 13.7 lakh crore for FY20. This includes CGST and SGST collections of around Rs 6.1 lakh crore each, Rs 1 lakh crore which is expected to be mopped up through the compensation cess route and another Rs 50,000 crore of IGST collection, that is expected to remain unallocated at the end of the year. These numbers imply a monthly CGST run rate (including IGST settlement) of around Rs 50,833 crore. But, so far, collections have averaged Rs 41,721 crore per month, well below the required run rate. Further, one must also point out that this estimate does not include refunds. The net of refunds, actual collections will be even lower, increasing the collection deficit. As a result, the required run rate for the remaining part of the year has already jumped to Rs 52,830 crore, according to a report by Kotak Institutional Equities. Achieving this is a tall order, especially considering the slowdown in economic growth.
And then there’s the shortfall on the income tax side to consider as well. As against a target of Rs 5.29 lakh crore in FY19, collections stood at Rs 4.61 lakh crore, implying that collections would have to grow by a staggering 34.8 per cent in FY20 to meet the interim budget target of Rs 6.2 lakh crore. Considering that nominal GDP is likely to grow around 10.5-11 per cent, the tax collection targets for FY20, presented in the interim budget, do appear to be too optimistic. The new finance minister should consider revising the estimates to present a more accurate picture of the government’s accounts.