HYDERABAD: Total tax collections in the current financial year (FY20) could be lower by as much as Rs 3.7 lakh crore or 1.7 per cent of the GDP.
During the first six months of FY20, tax receipts grew at a dismal 2.4 per cent, and given that collections from states are likely to be lower than targets, overall tax mop-up could miss Budget estimates, according to a study by Motilal Oswal.
The report notes that total taxes of general government (Centre plus 18 states) grew just 3.2 per cent each during Q1 and Q2 of FY20. As a percentage of Budget Estimate, total receipts stood at 41.5 per cent in H1 FY20 — the lowest in the past five years.
“Since the Centre has guaranteed 14 per cent growth in tax collection for states by 2021-22, it might have to offset lower growth in tax receipts of states in FY20 and thus face additional burden on finances.
Therefore, while the shortfall in states’ receipts would be lower than otherwise, tax collection of the general government could be lower by Rs 3.7 lakh crore,” research analysts Nikhil Gupta and Yaswi Agarwal said in the report.
Tax collection estimate for the current fiscal is Rs 24.6 lakh crore. Last fiscal too, the government fell short of its targets.
While the gross tax revenue estimate for FY19 was Rs 22.7 lakh crore, the provisional actuals stood at Rs 20.8 lakh crore, translating to a shortfall of Rs 1.9 lakh crore.
The study says total government spending grew at the fastest pace since FY13 during Q2, but such spending spree won’t continue. “This is because the combined fiscal deficit of general government has already reached 73 per cent of Budget Estimate in H1, FY20,” it noted.
The government’s disinvestment drive may not rake in additional funds to make up for the shortfall in direct and indirect taxes.
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While the target for disinvestment proceeds was set at Rs 1 lakh crore, so far, only about Rs 12,000 crore has materialised.
Offloading stakes in major state-run entities like BPCL could fetch handsome gains. But with just four months left in the financial year, it’s doubtful if the government will meet its own disinvestment target.
TIGHTEN BELT, GOVT DIKTAT TO MINISTRIES
The government has asked all ministries to be prudent in their expenditure, officials said. Ministries have been told to restrict spending to urgent and essential matters.
The decision comes in the backdrop of bleak revenue scenario and 53.4 per cent of estimated spending for the full year having been exhausted in the first half of the year itself.
TNIE had reported last week that the government might miss revenue targets and be forced to cut expenditure.