Narendra Modi government exceeds tax collection target, but Pradhan Mantri Garib Kalyan Yojana aka IDS II comes a cropper

IDS-II imprint nowhere near the Rs 1 lakh crore government officials had talked of earlier.

revised estimate, tax collection, demonetisation, PMGKY, personal income tax, tax rate increases, excise collections
IDS-II imprint nowhere near the Rs 1 lakh crore government officials had talked of earlier. (Source: PTI)

The Centre has exceeded its revised estimate (RE) for gross tax collection for 2016-17 by some `13,000 crore or a modest 0.8%, but the post-demonetisation Pradhan Mantri Garib Kalyan Yojana (PMGKY), also known as Income Disclosure Scheme-II, seems to have come a cropper. According to sources, around `13,500 crore or roughly half of the estimated tax proceeds from IDS-I — the window for which was open between June and September 2016 — had come in by March 31. Net of this, personal income tax (PIT) revenue grew some `52,000 crore in 2016-17 over the previous financial year. Though the PIT growth in 2016-17 was significantly higher than the annual growth levels in years of comparable economic expansions in recent past (see table), the IDS-II imprint was clearly absent in the tax data released by the finance ministry on Tuesday.

Apart from IDS-I, the post-demonetisation window to use old notes to pay taxes and the surge in income reported by sections of traders, professionals and service providers after the note ban had also pushed up the PIT revenue. Senior government officials had earlier talked of a massive `2 lakh crore disclosure under IDS-II — about 50% of which was to be collected by the government as tax. However, the sources, without revealing how the scheme had fared, said the amount collected under IDS-II was yet to be computed. Recently, the government has said in Parliament that since the last date of making declaration under PMGKY was March 31, 2017, “the amount collected under PMGKY shall be firmed up only after (that date)”.

However, the government seems to expect a fair chunk of tax revenue from IDS-II in 2017-18, even though far lower than initially assumed. Its PIT target for 2017-18 is `4.41 lakh crore, up 25% (`88,081 crore) over the RE for 2016-17. This is even as the GDP growth in 2017-18 is assumed to be only marginally higher than last year’s and the recent budget did not witness any tax rate increases. The overall tax revenue growth for 2016-17 was 18%, compared with RE of 17%. Collections in the year (sans the taxes on Union Territories) stood at Rs 17.1 lakh crore as against RE of Rs 16.97 lakh crore.

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Indirect tax collection grew 22% (RE was 20%) to Rs 8.63 lakh crore and direct taxes went up by 14.2%, the same as the RE, to Rs 8.47 lakh crore. PIT collection refunds were in fact lower than the RE (22.8%) at 21%. This was despite the growth in PIT refunds in 2016-17 being slower than that in the previous year (PIT before refunds grew only 18.4% in 2016-17). Corporate taxes, the largest revenue stream for the government, grew only 6.7% in 2016-17, lower than the RE of 8.9%.

Helped primarily by the series of hikes in excise duties on petroleum products, excise collections grew a robust 33.9% to Rs 3.83 lakh crore (RE, 34.5%) and service tax revenue grew 20.2% to Rs 2.54 lakh crore (RE, 17.1%). Customs collections rose 7.4% to Rs 2.26 lakh crore in 2016-17, higher than RE of 3.2%, thanks to recent surge in gold imports.

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