Govt plans PSU stake sales to recoup loss from tax cut
Finmin also looking at higher revenue from widening of tax base
NEW DELHI: The finance ministry hopes to recoup at least some of the ₹1.45 lakh crore it will lose as revenue due to the tax cuts for companies announced on Friday from disinvestment (especially because the stock market is looking up), collecting tax arrears (of over ₹12 lakh crore), and higher revenue from widening of tax base and higher growth, a government official said on condition of anonymity.
He and a second official, who too asked not to be identified, said that the government could also consider using part of the ₹1.76 lakh crore surplus it received from the Reserve Bank of India (RBI) as a last resort. The idea, the two officials added, is to try and maintain the fiscal deficit at around 3.3% of GDP in this fiscal year.
The second official said that the government could also use the buffer it is allowed, and then narrow the deficit again “once the economy is back on the higher growth trajectory.”
The government last month received ₹1.76 lakh crore from RBI in the form of a transfer of dividend and surplus, which is almost double the budgeted amount of ₹90,000 crore. Talking to reporters on Sunday, finance minister Nirmala Sitharaman said that government had not taken any decision with regard to the usage of the money it has received from the RBI. “I have not even applied my mind to it,” she said.
The board of the central bank on August 26 decided to transfer a sum of ₹1.76 lakh crore to the government that included ₹1.23 lakh crore surplus for the year FY19 and ₹52,637 crore of excess provisions identified as per the revised economic capital framework (ECF).
“Partial usage of RBI money should be alright so long as the usage does not exceed the current income of the RBI. This is a temporary mismatch of revenues and expenses and it is expected that over a period of time, it will provide sufficient confidence to the industry to restart the private green field capital investments which in turn, should provide the additional revenues to the government in terms of additional taxes,” said SR Patnaik, partner and head – taxation, Cyril Amarchand Mangaldas.
DK Srivastava, chief policy advisor, EY India, said that the government should make extra efforts to raise non-tax revenues and garner disinvestment proceeds over and above the budget estimates. “The impact of the CIT (corporate income tax) rate reductions along with export incentives announced prior to these on fiscal deficit will depend on the extent of economic recovery in the remaining part of the fiscal year. A good part of the additional RBI dividends may be used to cover for revenue overestimation in the 2019-20 budget. However, some of it may become available for balancing the reform-related revenue foregone.”
“It is also time to explore expenditure restructuring options to reduce revenue deficit. Some slippage in fiscal deficit is expected. It may be in the range of limited 30-40 basis points of GDP,” he added.
Naveen Wadhwa, deputy general manager, Taxmann said the government appears confident that it will not deviate from fiscal deficit roadmap.
“As per the government officials, the recovery of this tax loss would be made out of surplus money transferred by RBI, divestment of major PSUS (public sector undertakings) and efficient tax collection and recovery,” he said.
CENTRE COULD ALSO CONSIDER USING A PART OF THE ₹1.76 LAKH CR SURPLUS IT RECEIVED FROM THE RBI AS
A LAST RESORT