NEW DELHI: Staring at a revenue shortfall of over Rs 6.5 lakh crore and with less headroom for
raising direct tax collection, the government is mulling to increase indirect taxes, which includes cess and excise duty, to make up for the deficit.
“The tax collection is not up to the mark and we do not see a major revival in trend in the first six months of the current fiscal. One way is to increase direct taxation but the finance ministry has ruled out any increase in the tax slabs. There can be some tweaks. However, to compensate for the loss, there may be a spike in indirect taxes, new cess, and some duty hikes,” a senior official from the finance ministry said.
According to the official, we can expect hikes in import duties, which will be aligned to the government’s Aatmanirbhar Bharat initiative, and the items where duty is likely to be increased has already been shortlisted. “The government has increased the import duty of many items and now there may be fresh levies on some of the items.Also, the talk is on Covid-19 cess. However there could be last minute changes,” the official added.
This fiscal year, tax collection and the proceeds from disinvestment in state-owned entities are likely to miss the budget estimates target by over Rs 6.5 lakh crore. The government had initially estimated Rs 24.23 lakh crore to come from direct and indirect taxes and Rs 2.1 lakh crore from disinvestment. However, the revised estimates have pegged the collection at around Rs 20 lakh crore, down by 25 per cent.
Meanwhile, the official brushed aside any major concern regarding revenues. “There is no need to worry too much about the revenues. This was an exceptional year so many things were derailed but things are now improving. Next fiscal year, the divestment targets are going to be ambitious so it will make up for the loss.
"We are also tightening the GST system and tax collection is certainly going to get a boost. So things will be not as bad as it is looking like,” the official added. The union budget is slated to be presented in the Parliament on February 1 and the budget session will be held between January 29 and April 8, 2021.
Tax pie gets altered post pandemic
India’s tax pie seems to have undergone a subtle change post Covid, with direct tax collections seeing a sharp drop. The share of indirect tax, however, went up