Tax officials may ask for 6% reduction in collection target in Budget 2019

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Tax officials are likely to ask for a reduction up to 6 percent in their collection target in the full Union Budget for 2019-20, compared to what was given in the interim Budget. That 6 percent would translate into a reduction of Rs 1.5 trillion. The new finance minister, Nirmala Sitharaman, has already expressed concern over revenue collection at interactions with officials. The cuts are being sought by both the direct and indirect tax departments. Direct tax officials are going to ask for a cut in their collection target by Rs 60,000-70,000 crore or 4.3-5.1 percent of the figure in the interim Budget for 2019-20, for overall yearly growth of 15 percent. If approved, the direct tax collection target would be revised at close to Rs 13 trillion, from Rs 13.8 trillion in the interim Budget.

As for indirect taxes, the central goods and services tax (CGST) growth target might be cut by Rs 70,000-80,000 crore in the full Budget or 11.5-13 percent of the interim Budget if one assumes a realistic growth of 17-20 percent against the previous year’s actual collection. The growth will be 35 percent if the target is not changed. The CGST target collection for 2018-19 was also lowered by Rs 1 trillion in the interim Budget presentation this year (when that financial year was still not over). However, it still fell short by over Rs 40,000 crore. The gross actual total (direct plus indirect) tax collection in 2018-19 fell short by Rs 1.7 trillion or 7.5 percent of the Revised Estimates for the year, given in the interim Budget. That, coupled with the slip in economic growth, makes the target for 2019-20 given in the interim Budget highly unrealistic, contend officials. In terms of net collections (after devolution to states) the shortfall was Rs 1.6 trillion or 11 percent of the revised estimates for FY’19. With the government itself expecting the economic slowdown to continue till the end of the first quarter (April-June) of FY20, the revenue position is unlikely to see a significant driver till at least the fourth quarter and that only if growth picks up, officials said.

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