India May Miss Direct Tax Collection Target For FY19 By Nearly Rs 60,000 Crore

The government's direct tax collection is likely to fall short of its estimates for the second straight financial year after it revised upwards the target expecting a higher mop-up from corporate tax.

India has managed to collect direct tax of Rs 11.38 lakh crore in the financial year ended March against its revised budgeted target of Rs 12 lakh crore, a shortfall of Rs 60,000 crore, according to a senior government official.

In 2014-15 and 2015-16, the government had lowered its direct tax collection target and still missed it. In 2016-17, the government exceeded the target.

“The upward revision in direct tax target was largely driven by an anticipated shortfall in goods and services tax revenue,” said DK Srivastava, chief policy advisor at EY India. “The government's effort to cover the shortfall with an increase in direct tax collection may not have worked out.”

The shortfall in direct tax collection and lower GST realisation may have an impact on fiscal deficit, which the government pegged at 3.4 percent of the gross domestic product.

In the interim budget 2019-20, the government had revised the GST collection target for 2018-19 from Rs 13.48 lakh crore to Rs 11.47 lakh crore. The total GST collected in the previous financial year was Rs 11.76 lakh crore.

“Either the fiscal deficit should widen, or there would have been a contraction in capital expenditure if the government were to meet its fiscal deficit target which will adversely impact growth in the short term,” Srivastava told BloombergQuint.

Another government official, however, said India has managed to meet its revised fiscal deficit target of 3.4 percent for the last financial year.

Growth In Tax Collected

Direct tax collections rose 14 percent year-on-year in the last financial year, according to government data. That compares with an average growth of 12 percent in the last five fiscals. Tax collected in the last five years jumped 70 percent to Rs 11.38 lakh crore.

The number of returns filed by taxpayers increased from 3.31 crore in 2014-15 to 5.43 crore in 2017-18, a growth of 64 percent. The government has not yet released number of returns filed for 2018-19.