Fiscal deficit: FY18 tax mop-up on target

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New Delhi | Published: April 3, 2018 6:03:18 AM

Improved buoyancy and slow refunds take direct tax collections to `10L crore; fiscal deficit lower than RE, tweets DEA secretary.

Fiscal deficit, gst, india, economy, gdpThe Economic Survey 2017-18 had noted that from about 2% of GDP between 2013-14 and 2015-16, personal income tax collections are likely to rise to 2.3% of GDP in 2017-18, a historic high.

In what gave some credence to the government’s claim that the crackdown on black money through various means including demonetisation has boosted revenue buoyancy, direct tax collections grew 17.1% in 2018-19, the fastest pace since 2010-11, while the goods and services tax (GST) collections, though much below targets, appeared to gradually recover from the December trough.

Direct tax buoyancy rose sharply from 0.7 in 2015-16 to 1.8 in 2017-18, reflecting enhanced efficiency of the tax mop-up exercise and, to an extent, a widening base.

The Narendra Modi government has undertaken a series of steps to encourage formalisation of the economy: demonetisation, GST, income disclosure schemes and promotion of digital payments.

In the financial year that just ended, close to Rs10 lakh crore (Rs 9.95 lakh crore at last count and at least another Rs 5,000 crore may finally be accounted for) has been collected as direct taxes net of refunds, against the target (revised estimate) of `10.05 lakh crore. Of course, the growth in collections was partly enabled by a significant slowing of refunds in 2017-18 compared with the previous year: as against 1.62 lakh crore in 2016-17, only Rs1.49 lakh crore was refunded in 2017-18.

According to a revenue department release, “There has been a sustained increase in the number of income tax returns (ITRs) filed in the last four financial years. As compared to 3.79 crore ITRs filed in 2013-14, the number of ITRs filed during 2017-18 (6.84 crore) has increased by 80.5%.” Also, the number of new income tax filers rose to 99.5 lakh in 2017-18, up 16.3% from the previous year.

But expanded the taxpayer base doesn’t mean an equal number of people have actually started paying taxes. A significant number of new filers are people claiming nil tax liabilities. This is true of both GST and personal income tax. About 40% of the GST registrants of over 1 crore are claiming nil tax liability.

“On the whole, tax collections for 2017-18 have been good despite the uncertainty due to GST roll-out. We have achieved the targets on both direct and indirect taxes and are well on course to achieve the fiscal deficit target (of 3.5% of the GDP),” finance secretary Hasmukh Adhia said.

Separately, department of economic affairs (DEA) secretary Subhash Chandra Garg tweeted: “With almost all of Revenues and Expenditure accounted for (some minor accounting adjustments remaining), I can confirm that both Fiscal Deficit and
Revenue Deficit are lower than the Revised Estimates for 2017-18.”

The improved tax buoyancy and some savings on expenditure (where the departments could not spend sanctioned amounts) would help the Centre achieve the deficit target. This is despite the fact that in April-February, the fiscal deficit stood at 120% of the full-year target, with total expenditure during the period being 90% of the annual target.

The Economic Survey 2017-18 had noted that from about 2% of GDP between 2013-14 and 2015-16, personal income tax collections are likely to rise to 2.3% of GDP in 2017-18, a historic high. This was proven true as net PIT collections grew a robust 18.9% in 2017018 while the corresponding corporate tax growth was 17.1%. “The sum of all government efforts (demonetisation, GST and income disclosure schemes) increased income tax collections, thus far, between Rs 65,000-90,000 crore. These numbers imply a substantial increase in reported incomes of about 1.5-2.3% of GDP,” the survey, released on January 30, had said.

On GST collections, the government said that the overall collections (including cess proceeds) in the first eight months since the tax’s implementation stood at Rs 7.18 lakh crore. That is, the monthly average GST collection was a tad below Rs 90,000 crore. However, the 2018-19 GST target continues to look ambitious. If the collections remain at the current level, what could go to the Centre’s kitty is just around Rs 43,000/month. To meet the budget target, the monthly GST share (including cess proceeds) needs to be Rs 62,000 crore.

Adhia, however, said that with the roll-out of the anti-evasion measures, the GST collections would pick up further in the coming months. Though February GST (collected in March) was a tad higher than the previous month’s at Rs 89,264 crore, the increase was also because a section of the businesses cleared their past liabilities before the end of the fiscal.

Meanwhile, the Central Board of Indirect Taxes and Customs (CBIC) said that it has disposed of 90% of the integrated GST refund claims of exporters. The refund to exporters had been delayed due to mismatches between details filed by exporters at GSTN portal and customs department.

In all, Rs 9,604 crore of integrated GST refunds have been made. Additionally, the Centre and states have cleared Rs 5,510 and Rs 2,502 crore of input tax credit refund claims respectively. Apart from this, Rs 16,680-crore duty drawback has been disbursed to the exporters during July-March period, and another Rs 1,833-crore ROSL claims have been cleared, giving relief to exporters from embedded state levies.

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