Budget 2020 India: IDFC AMC suggests overall GST collection is likely to be short of the budgeted amount by Rs 84,000 crore.
Budget 2020-21: In the last two annual budgets, the government had made GST targets highly optimistic, which further kept the GST council on its toes. Even in the current fiscal, GST collections till December is only around 69 per cent of the budgeted amount, raising the monthly required rate to a significantly high level. IDFC AMC suggests overall GST collection is likely to be short of the budgeted amount by Rs 84,000 crore, with the centre’s gross collection and SGST each lower by Rs 42,000 crore. Multiple tax rate cuts have likely pushed GST into the revenue-deficit mode but the immediate corrective return to higher rates doesn’t seem to be a solution amid a major slowdown.
“GST collections have consistently fallen short and budget estimates have been marked down in the last two years and this year is likely no different, with the economy witnessing a growth slowdown and tax buoyancy continuing to stay low. This should ideally guide the central government towards setting more realistic GST estimates in its upcoming Budget 2020,” said Sreejith Balasubramanian, Economist – Fund Management, IDFC AMC.
However, there’s another more immediate problem is tiding over FY20 before the Union Budget 2020. The estimates suggest cess collection is likely to fall short by Rs 15,000 crore while compensation requirement could be higher by Rs 55,000 crore than budgeted, he added.
The shortfall in the government tax revenue may also generate the need to charge the corporates that recently got the gift of a substantial reduction in corporate tax. “Meeting the GST targets will be a tough task for the government and inadequate GST tax revenue might push the government to target more tax from corporates aggressively,” Rajesh Gupta, Co-Founder & Director, BUSY (Accounting Software).
Watch Video: What is Union Budget of India?
Meanwhile, structural design, complicated process, and the culture of compliance have remained a major roadblock in the smooth functioning of GST in the country while tax evasion has also been reported at regular intervals. Un-branded goods, fake entities to claim the input tax credit, fake bills, fraudulent invoicing, etc have been adding to the trouble.