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India may miss tax collection target for 2019-20 by nearly Rs 2.5 trn: Garg

The government’s tax collection is likely to fall short of its estimate by Rs 2.5 trillion or 1.2 per cent of GDP in 2019-20, former finance secretary Subhash Chandra Garg said on Sunday while calling for scrapping of dividend distribution tax.

Garg in a blog said that from the tax revenues perspective, 2019-20 is proving to be a dysfunctional year.

“Tax revenues to see shortfall of Rs 2.5 trillion (1.2 per cent of GDP). Time to junk DDT and reform personal income tax,” he said.

The government had budgeted gross tax revenues of Rs 24.59 trillion.

“Setting aside Rs 8.09 trillion as the share of the states, the budgeted net tax revenues to the Centre was kept at Rs 16.50 trillion. This was Rs 3.13 trillion higher than the provisional/actual net tax revenues of Rs 13.37 trillion collected in 2018-19, an increase of 23.4%.

“Indeed, it was quite a steep target,” Garg noted.

He said corporate tax, excise duties and customs are likely to see negative growth in collections in 2019-20- something of the order of 8 per cent in corporate taxes, about 5 per cent negative growth in excise duties (Rs 2.2 trillion against Rs 2.31 trillion) and about 10 per cent lower collection in customs duty (Rs 1.06 trillion against Rs 1.18 trillion).

Garg pointed out that overall, there is likely to be shortfall of Rs. 3.5 – 3.75 trillion in gross tax collections of the Centre.

Noting that this is quite a steep shortfall in collections, unlikely to be bridged by either higher accrual under the non-tax revenues or expenditure compression, he said, “Therefore, revision of fiscal deficit goal of 3.3 per cent by 0.5 per cent to 0.7 per cent appears quite inevitable.” The underlying tax revenue situation is grim, he said adding that it is the right time to initiate much needed reforms in the taxation structure.

Source: Business Standard