CENTRE NEEDS TO MOP UP ~4.2 TRN TO MEET FY18 INDIRECT TAX TARGET
Even as the Centre appears confident of meeting the budgeted indirect tax collection target for FY18, a detailed analysis shows that it would have to mop up close to ~4.2 trillion in the last four months to meet the Budget Estimates. In comparison, in the first eight months of the current financial year, it is likely to have collected around ~5 trillion. The budgeted indirect tax collection target for FY18 is ~9.26 trillion. ISHAN BAKSHI writes
Even as the Centre appears confident of meeting the budgeted indirect tax collection target for FY18, analysis shows it would have to mop close to ~4.2 trillion in the last four months to meet the Budget Estimates.
In comparison, in the first eight months of the financial year, which ends on March 31, it is likely to have collected around ~5 trillion. The budgeted indirect tax collection target is ~9.26 trillion.
And, while some states have expressed concern over a decline in their revenue under the goods and services tax (GST), analysis shows states are together likely to have received about ~1.5 trillion under the levy by the end of November. Of this, ~245 billion has been distributed among them to compensate for loss in revenue under the new regime. Surprisingly, producer states Maharashtra and Tamil Nadu, thought to incur losses under GST, have received lower compensation than consuming states such as Uttar Pradesh, Rajasthan and Bihar.
Recent data shows ~3.67 trillion had been garnered under GST by the end of November. Of this, ~590 billion was through Central GST (CGST), and ~878 billion through State GST (SGST). And, ~1.9 trillion was collected through Integrated GST (IGST), of which ~900 billion was through import. Another ~302 billion was collected through the cess route but of this, only ~244 billion has been distributed among states.
Now, of the ~1.9 trillion through IGST, data from the controller general of accounts shows ~1.38 trillion was sitting on the government book at the end of November. This means the difference between the two, ~521 billion, was transferred to both Centre and states. Assuming equal share implies the Centre received ~260 billion by way of IGST. Add the CGST collection, and its revenue stands at ~850 billion.
Now, given that in the recent GST council meet, the Centre and states have decided to share the IGST credit of ~350 billion equally, one could assume the balance IGST is likely to be distributed equally among Centre and states. This places the Centre’s “hypothetical” total under GST at ~1.54 trillion (CGST ~854 billion and IGST of ~691 billion).
Add to that other indirect tax collection of ~3.47 trillion, including excise duty on petroleum and Customs duty, and the Centre’s total indirect tax collection stand at ~5.01 trillion, leaving a shortfall of ~4.2 trillion to be met from December to March.
In comparison, indirect tax collection had totalled ~3.52 trillion from December to March of FY17. If we add 8.8 per cent growth over it, as assumed in the Budget for 2017-18, the government could expect ~3.83 trillion this under the GST. December-March. This will But surprisingly, other leave a shortfall of ~370 billion. manufacturing powerhouses
On the issue of states’ revenue, such as Maharashtra and by the end of Tamil Nadu have received November, states had compensation that is lower received ~878 billion through than that received by the SGST and another ~245 billion “consumption” states of as compensation. Add to that Rajasthan, Uttar Pradesh and transfers from IGST of likely Bihar. While Karnataka ~260 billion, and total state received ~32.71 billion till revenue under GST is likely to November, Gujarat received have been around ~1.5 trillion. ~22.82 billion, Maharashtra But, this figure does not and Tamil Nadu received only include the states’ share of the ~83.4 billion and ~63.2 billion, ~1.38 trillion of IGST revenues respectively. still not distributed. Adding In comparison, “consumption that would take the states states” such as “hypothetical” share to more Rajasthan, Uttar Pradesh and than ~2.1 trillion. Bihar have received higher
Now, on the loss in revenue, compensation at ~19.11 billion, initially there were concerns ~15.20 billion and ~17.46 that some states, especially billion, respectively. those with a larger share Why is this so? There are of manufacturing, would lose several possible explanations. out under the GST. So in order “Manufacturing intensive to compensate states for the states are likely to have a substantial loss in revenue, a cess was of taxable volume consumption value higher imposed, revenue from which would go to states. Under the services, that attract GST, formula worked out, a state’s such as hotels and restaurants, revenue loss is measured as mobile, credit card and the difference between the e-commerce transactions actual revenue realisation etc,” said Aditi Nayar, principal under the GST and the tax economist at ICRA. revenue the state would have “There is also likely to be received under the earlier a positive correlation indirect tax regime, adjusting between factors such as per for a 14 per cent increase over capita income and urbanisation, the base year of 2015-16. with consumption of
According to data, at the services. This would provide end of November, the states a buffer to any loss of tax revenue of Karnataka followed by on manufactured Gujarat and Punjab have goods under the GST received the maximum compensation regime,” she for said. revenue lost