GST receipts robust but only 11 months’ revenue will be accounted for in FY18.
Determined to keep the brisk pace of spending achieved in the initial months of the fiscal year, the Centre might look for avenues other than the budgeted to boost receipts as it sees shortfalls under some key revenue heads like the telecom spectrum and dividend from the RBI. Even though initial signs are that GST receipts will be robust and direct taxes too have got some post-demonetisation fillip, only eleven months’ GST receipts could be accounted for in the current year, finance secretary Ashok Lavasa told FE in an interview. Even as the GDP growth slowdown is posing another fiscal risk, he said the finance ministry will ensure that the budgeted fiscal deficit of 3.2% of the GDP for 2-17-18 is not breached.
In the pre-GST regime, excise and service taxes for any month were paid by the end of the same month, which meant all twelve months’ revenues were accounted for in the same financial year; however, under GST, revenue for a month will be accounted for in the subsequent month when the taxes are actually paid by the assessees. So, the GST revenue for the next March will reflect in 2018-19, instead of this year. “We have to make an assessment to see what will be the impact because of this,” Lavasa said, adding that accounting will self-correct from the next financial year. A month’s GST revenue is equal to roughly Rs 1 lakh crore, half of which the Centre can lay hands on.
“Most of the schemes where implementation is good, we have allocated money,” the official said. Spending on schemes such as housing, rural drinking water supply and rural electrification would continue to get budgeted funds, he said. “We don’t foresee any slowing down in terms of spending this year,” he reiterated.
Although the finance secretary hasn’t revealed the revenue areas being tapped to bridge any potential shortfall from budget estimate and keep the spending momentum which is crucial for the slowing economy largely deprived of private investments, more aggressive PSU privatisation, unlocking of government’s holdings in private firms held via SUUTI and monetisation of government land etc. are among the possible options.
Of course, ONGC’s acquisition of majority stake HPCL will yield the government some Rs 28,000 crore or so, but this, sources said, was seen when the disinvestment target of Rs 72,500 crore was set.
The Reserve Bank of India has paid only half of Rs 58,000 crore dividend estimated for this year while telecom firms have pleaded difficulty in paying spectrum charges and license fees up to the budgeted Rs 44,342 crore. Last year too, the Centre had to slash the spectrum-related revenues to Rs 78,700 crore from the original budget estimate of Rs 98,994 crore. As reported by FE earlier, the government and the Reserve Bank of India are in talks to explore the possibility of the central bank transferring more dividend for 2017 than it has announced. Earlier this month, the RBI sharply cut its annual dividend to the government to Rs 30,659 crore from Rs 58,000 crore budgeted by the Centre and about Rs 65,876 crore transferred in 2016. gWe have to see which are the (revenue) areas where there could be shortfalls and whether we can make these up from other sources,h Lavasa said.
The Centre’s spending was ahead of trend with 38% of the full year target of Rs 21.47 lakh crore, already spent in April-July. The ratio was about 33% in the corresponding periods of 2016-17 as well as in 2015-16. The front-loading of expenditure this year was mainly due to early passage of the budget, which gave many departments flexibility to spend on social and physical infrastructure. In April-July this year, the Centre’s major subsidies rose 42% year-on-year to about Rs 1.5 lakh crore while capital expenditure rose 33% to Rs 95,126 crore. Overall spending in the first four months of this year was at Rs 8.08 lakh crore, up 23% y-o-y.
The Centre’s gross tax revenue in April-July this year stood at Rs 4.52 lakh crore, up 17% y-o-y, as against the required rate of 11.3% to meet the budget target of Rs 19.11 lakh crore. Net tax revenue to Center (after devolution to States) grew by 19%.
The government has also allowed most of the schemes under the 12th Plan, which ended on March 31, to continue after their revaluation this year. However, the various departments have been given freedom to drop a few components of some schemes, which did not show the desired results, Lavasa said. There were about 100 schemes including centrally sponsored schemes and central schemes, which were re-evaluated to determine their utility.