NEW DELHI: The economic slowdown and the corporate tax bonanza will result in a revenue shortfall to the tune of Rs 2.50 lakh crore, according to an internal assessment of the revenue department. "The internal assessment suggests that the total revenue shortfall will be to the tune of Rs 2.50 lakh crore, post this announcement. Even before the corporate tax was announced, the department had flagged that tax collection may fall short by Rs 1 lakh crore, and now there is an additional burden of Rs 1.45 lakh crore," an official from the Department of Revenue said.
The official added that ahead of the announcement made by the minister, the finance ministry and the PMO were apprised of the likely revenue shortfall and the decision was taken after weighing the pros and cons.
According to the official, the total direct tax collection was about Rs 5.5-lakh crore, against Rs 5.25-lakh crore during April-September 2018-19. The net collection after deducting refunds was about Rs 4.5-lakh crore, against Rs 4.25-lakh crore. Advance tax collection was Rs 2.2-lakh crore against Rs 2.05-lakh crore. However, this was below what the government expected for this fiscal.
The government has set a direct tax collection target of Rs 13.35-lakh crore for this fiscal year, which is 16 per cent higher than the Budget estimate (Rs 11.50 lakh crore) and 11.25 per cent higher than the revised estimate (Rs 12 lakh crore). To meet the target, tax authorities now have to collect Rs 7.85 lakh crore in six months, a growth of over 20 per cent, which seems challenging.
The revenue from the corporate tax was 3.56 per cent of GDP in India for 2018-19. The share of direct taxes, including personal income tax, was 6.4 per cent of GDP. Regressive indirect taxes still account for more than 60 per cent of all tax collections in India, including by the states.
However, the official added that it will not result in a steep rise in the fiscal deficit as the government is expecting better non-tax revenue.