Meeting FY14 target means beating even FY11 Nov-Mar tax performance

Written by fe Bureau | New Delhi | Updated: Dec 24 2013, 19:39pm hrs
Tax collectionThough tax collections pick up quite dramatically in the second half of the year (AP)
Though tax collections pick up quite dramatically in the second half of the year, India will still face significant tax shortfalls in FY14, probably of the order of R60,000-70,000 crore, reports fe Bureau in New Delhi. While the big hope was the resolution of big-ticket tax cases like the Vodafone one, and a good response to the service tax amnesty scheme, the former is nowhere near a quick resolution and the response to the amnesty scheme has been lukewarm.

Past years are not always a good guide as to this years collections. In FY11, for instance (see chart), while 50.5% of the budget target was achieved in April to October, over 56% of the years target was met in the November to March period. If the same success was to be achieved this year, the years total tax collections could reach R1.22 lakh crore, a shortfall of R16,930 crore. But keep in mind that while imports rose 27.6% in FY11, they have contracted 5.6% in the first eight months of FY14; similarly, while industry grew 9.2% in FY11, the best case for this year is 1-2%.

If you assume tax collections grow in the manner they did last year, since growth rates are broadly comparable, total tax collections this year will be around 94% of the budgeted R12.4 lakh crore, leaving a shortfall of R74,000 crore a stupendous last-month drive could perhaps reduce this by another R10,000 crore at best. This means the year will end with a collections growth of under 12% compared to the target of 19%.