The central government raised Rs.9.98 trillion in direct taxes in 2019-20, representing a record shortfall of Rs.1.75 trillion or 14.7% compared to revised estimates (RE). This could lead the tax administration of the Department of Finance to revive fiscal mathematics for 2020-21, officials said.
According to a high tax official, the huge deficit can be explained by the general economic slowdown, in addition to the reduced corporate tax rates, the unimplemented Vivaad-Se Vishva tax settlement plan and the continued blockade of Kovid-19.
According to the official figures, the gross amount of direct taxes as at 31 December 2006 was Rs. 11.81 trillion. This includes a tax refund of Rs. 1.83 trillion. Net revenue was Rs. 9.98 trillion compared to a revised estimate of Rs. 11.70 trillion.
Of this amount, the Centre received Rs. 5.42 trillion in corporate income tax and Rs. 4.43 trillion in income tax. Other minor taxes, such as the Securities Transaction Tax (STT), complement the rest. The figures may be slightly corrected because some banks have not yet submitted their collection notes, but that will not make much difference, the official said.
The deficit-to-GDP ratio for fiscal year 20 is the highest in recent history. In the years 2018-19 it was 5.3%.
In the previous crisis period (2008-2009) this was 7.5 percent. In the Union budget for 2020-21, the government has revised the target for tax collection from Rs.13.35 trillion to Rs.11.70 trillion for FY20. The government has tightened tax collection targets and noted that revenues lost as a result of the reduction in the corporate tax rate will amount to Rs. 1.45 trillion.
Mumbai, which accounts for approximately 37% of tax revenue, experienced a significant drop of 10% compared to BP. It collected Rs. 3.09 trillion against the revised target of Rs. 4.29 trillion, leaving a huge hole of Rs. 1.20 trillion. The state capital, New Delhi, also recorded a decline of more than 8 percent, followed by Bengaluru, which also recorded a decline of more than 5 percent.
The deficit could increase the centre’s budget deficit, which for this financial year amounts to 3.8% of gross domestic product (GDP), according to a source within the general government. In February, the budget deficit was 35% higher in absolute terms than the budgetary target for the financial year 20. However, the government’s attention is no longer focused on the economic situation, but on controlling the Covida-19 epidemic, which interrupted almost all economic activity.