CEN­TRE NEEDS TO MOP UP ~4.2 TRN TO MEET FY18 IN­DI­RECT TAX TAR­GET

Business Standard - - FRONT PAGE - ISHAN BAKSHI

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

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