DIRECT TAX MOP-UP FALLS ~1.75 TRN SHORT OF REVISED FY20 TARGET

The central government collected ~9.98 trillion as direct taxes during 2019-20, leaving a record shortfall of ~1.75 trillion, or 14.7 per cent,

compared with the revised estimates (RE). This may prompt the revenue department, under the finance ministry, to reset its Budget math for 2020-21, official sources said. According to a senior revenue official, the massive shortfall can be attributed to the overall economic slump, besides corporate tax rate cuts. SHRIMI CHOUDHARY reports

The central government collected ~9.98 trillion as direct taxes during 2019-20, a record shortfall of ~1.75 trillion, or 14.7 per cent, compared with the revised estimates (RE). This may prompt the revenue department, under the finance ministry, to reset its Budget math for 2020-21, official sources said.

According to a senior revenue official, the massive shortfall can be attributed to the overall economic slump, besides corporate tax rate cuts, the Vivaad se Vishwas tax settlement scheme proving to be a non-starter, and the ongoing Covid-19 lockdown.

Official figures showed that the gross amount collected under direct taxes as of March 31was ~11.81 trillion. This included the tax refunds outgo to the tune of ~1.83 trillion. The net collection, thus, stood at ~9.98 trillion, as against the revised estimates of ~11.70 trillion.

Of this, the Centre has received ~5.42 trillion as corporation tax and ~4.43 trillion as personal income tax. Other small taxes such as securities transaction tax (STT) constitute the rest. The figures could see a slight correction as some banks are yet to submit their collection receipts, but this will not make much of difference, said the official cited above.

The shortfall as percentage of the RE for FY20 is the highest in recent history. It was 5.3 per cent in 2018-19. In the earlier crisis period of 2008-09, it was 7.5 per cent. In the Union Budget 2020-21, the government had revised the tax collection target downwards to ~11.70 trillion for FY20, from ~13.35 trillion projected earlier. The government had rationalised the tax collections targets, noting the revenue forgone on account of the reduced corporation tax rate would be ~1.45 trillion.

Mumbai, which contributes about 37 per cent to the tax revenues, witnessed a significant drop of 10 per cent compared with the RE. It collected ~3.09 trillion against the revised target of ~4.29 trillion, leaving a huge gap of ~1.20 trillion. Similarly, the national capital, New Delhi, saw a drop of over 8 per cent, followed by Bengaluru, which also saw a fall of over 5 per cent.

The shortfall may widen the Centre’s fiscal deficit, which is pegged at 3.8 per cent of gross domestic product ( GDP) i n the current financial year, said a government source. The fiscal deficit surpassed the Budget target for FY20 by 35 per cent in absolute terms by February. However, the focus of the government is now not on the economic situation but to arrest the Covid-19 outbreak, which has halted almost every economic activity.