The FY21 budget had estimated nominal GDP growth at 10 per cent while the estimate for gross tax revenue was pegged at Rs 24.23 lakh crore.
The tax revenue of 12 per cent targeted in the budget for the upcoming financial year might look unrealistic to some amid the slowdown in the economy and corporate tax cut but not to Revenue Secretary Ajay Bhushan Pandey. The revenue tax collection target at 12 per cent for FY21 is “not an overestimate, it is not unreasonable,” Pandey said in an interview to Financial Express. “If the economy, like we are estimating, grows at 10 per cent,” he said in response to a question on whether the target is an unrealistic projection. The FY21 budget had estimated nominal GDP growth at 10 per cent while the estimate for gross tax revenue was pegged at Rs 24.23 lakh crore — up close to 12 per cent over the revised estimate for the current financial year.
“If you see the tax buoyancy this year, we had estimated the nominal growth rate somewhere around 12, 13, 14 per cent, and there we had estimated our tax growth at somewhere around 17-18 per cent. Again, it (tax buoyancy) was 1.3 or something,” Pandey said. However, with the nominal GDP growth rate down in FY20, the tax collection will also come down, he added. Tax buoyancy, which is a ratio of growth in tax collection to nominal GDP growth, for FY21 was budgeted to be 1.2.
With regards to the Corporate tax cut announced last September, Pandey said while such things are done at the time of the budget but “when we found that our economy needs certain special measures, particularly in the month of July, a conscious view was taken by the government as to why wait till the Budget…” The government had reduced the corporate tax rate from 30 per cent to 22 per cent for existing companies while for new manufacturing businesses, it was cut from 25 per cent to 15 per cent. “We issued an ordinance and later on converted it into an Act… So that we get the benefit right from April 1 (2019) itself. So it was, kind of, a beneficial retrospective legislation,” he said.
Asia’s richest man and Reliance chairman Mukesh Ambani on Friday said the current economic slowdown is temporary and is caused by external turbulence. “As we move into next decade, I am very optimistic and I think while we have seen temporary pains and the leadership that finance minister provided we’re just going to get out of it until external turbulence hit us, but I am very very optimistic,” Ambani had said at an award function by CNBC-TV18.