Tax revenue of the Centre, after the mandatory transfer to states, is expected to exceed the Budget target by at least R 50,000 crore, or close to 5%, during the current fiscal, helping the government meet the fiscal deficit target of 3.5% of the gross domestic product rather easily.
This is despite telecom spectrum proceeds lagging the budgeted figure by about R32,000 crore and nothing much is being garnered via strategic sale of PSUs.
Thanks to a likely fiscal bonanza, estimated to be upward of R2 lakh crore after demonetisation of high-value currency notes, the government would also stick to the 3% fiscal deficit target for FY18, sources said.
Net tax receipts are budgeted at R10.54 lakh crore for FY17. This target would be exceeded as the recently-concluded income declaration scheme could fetch R15,000-20,000 core, while indirect tax receipts are likely to be R30,000-35,000 crore higher than budgeted, mainly because of the robust growth in excise collections on the back of the rate increases for petroleum products effected last year.
“This estimate (R50,000 crore additional tax revenue) is without factoring in likely extra tax proceeds from demonetisation. While the income tax department has already started issuing notices to those who made cash deposits above R2.5 lakh crore in their bank accounts after November 10, many businesses could be showing higher turnovers after the crackdown on black money,” an official said.
In the April-October period, the Centre’s gross tax revenue receipts (before 42% devolution to states) stood at R8.62 lakh crore or 53% of the current year’s target, compared with R 6.93 lakh crore or 48% of the relevant target in the previous year.
Official data showed that the Centre’s gross excise duty collections rose 45% year-on-year during the period as against an 11% growth required to meet the annual target of R2.14 lakh crore.
On November 8, the government withdrew the legal tender status of existing R500 and R1,000 notes, constituting about R14.2 lakh crore or 86% of total notes in circulation as on March 31, 2016.
Cashholders are permitted to deposit these notes in their bank accounts by December 30 or exchange limited old notes for some time to overcome a cash crunch. Analysts say this would increase the size of the white economy, with businesses choosing to show sources of cash they tried to hide earlier and paying taxes on them.
Despite a likely shortfall in revenue from strategic sale of PSUs (the budgeted figure is R20,500 crore), the overall disinvestment target might be almost met because of aggressive buyback of shares by some cash-rich PSUs and
the sale of the government’s stake in private forms held through SUUTI.
Some believe that a fixed-band fiscal deficit target could be set from the next year after the NK Singh panel, entrusted with reviewing of the 13-year-old Fiscal Responsibility and Budget Management (FRBM) Act and the FRBM road map, submitted its report.
Sources said the range system, instead of the current practice of a fixed number as fiscal deficit, could be looked at from FY19. A fiscal deficit range of 3 +/- 0.3% looks plausible to many officials, who said a final decision in this regard would be taken closer to the FY18 Budget that will be tabled on February 1.