Big trouble is brewing for the Narendra Modi government in the financial year 2018-19. After State Bank of India (SBI) research, rating agency ICRA has pointed out that the centre is unlikely to meet its Budget estimates for indirect tax collection. An analysis by ICRA has shown that the government is likely to miss the Budget estimates mainly due to two important factors: a shortfall in CGST collection and tax cuts on fuel.
“…the CGST collections during April-November FY2019, were equivalent to around half of the Rs 6.0 trillion included by the GoI in its FY2019 budget, which suggests an impending shortfall relative to the level budgeted for this fiscal,” said Jayanta Roy, Group Head – Corporate Sector Rating, ICRA.
“As of now, it appears that there would be a shortfall in the overall tax revenues of the GoI, relative to the budgeted target for FY2019,” Roy added.
The shortfall in CGST may lead to a downward adjustment in the Central tax devolution (CTD) to states in FY19, the report pointed out. The centre transfers a portion of its shareable tax collections, comprising direct taxes and indirect taxes, as CTD to the state governments, based on recommendations by the Finance Commission.
Moreover, the excise duty cut of Rs 1.5 on per litre of petrol and diesel by the central government is going to hurt the government’s fiscal maths as well. This expected to have a revenue implication of Rs 105 billion.
Last month, a report by the State Bank of India (SBI) research also pointed out the shortfall in government’s indirect tax revenue. According to the report, due to subdued GST mop-up and excise duty cut on petroleum products, indirect tax collections could fall by Rs 90,000 crore in the current fiscal.