Given the ongoing slowdown and lower than expected collection of GST and direct taxes, due to a cut in corporate tax, the Centre is likely to keep the revenue targets modest in the forthcoming Budget for FY21 and instead focus on raising more resources through non-tax revenues. “The revenue targets are going to be conservative in the upcoming Budget, in sync with the current economic realities. The corporate tax reduction announced by the finance minister recently will also have its impact. So considering all factors do not expect high targets,” said a senior official from the finance ministry.
The matter was discussed in pre-Budget meeting with both the finance minister and in a meeting headed by the prime minister with NITI Aayog and Economic Advisory council, where it was suggested that the government needs to be realistic in its approach while setting targets. The government had pegged tax revenue growth at 25.26 per cent in current fiscal. However, tax performance has been weak in the wake of slowdown, the government’s decision to reduce corporate tax rates and lower than anticipated GST revenues. The government is already staring at a wider revenue deficit and is likely to miss the revenue collection target.
The government has set a direct tax collection target of Rs 13.35 lakh crore for the current fiscal, which includes Rs 7.66 lakh crore from corporate tax and Rs 5.69 lakh crore as income tax. “The corporate tax collection is just half of what the government has intended as on January 10. Even personal income tax is not very rosy. The revenue department is working hard to achieve the target but still there will be a massive shortfall,” said an official from the Department of Revenue. Another dampener is almost stagnant GST collection. The Central GST collection fell short of the Budged estimate by about 40 per cent during the April-November period of 2019-20, the government admitted in Parliament.