The government has lowered its total tax collection target for the fiscal by 5% of the Budget estimate target of R14.5 lakh crore, largely due to less-than-projected direct tax collections from April to August. In the Budget, the finance ministry had projected y-o-y increase of 15.8% in gross tax collection from the last fiscal.
During the first 5 months of FY16, while indirect taxes grew over 36% against a budgeted target of 19.5%, the dampener was direct taxes which rose just 8.5%, below the 13.3% target for the fiscal. Growth in indirect taxes was because of government measures such as increase in excise duty on petroleum products, increase in service tax from 12.36% to 14% in June, and doing away with excise duty concessions to the auto and capital goods sectors in January this year.
While the ministry is confident the Centre’s fiscal deficit would be restricted to 3.9% of GDP, there could be trimming in expenditure. Finance ministry will do well by keeping in mind that the Standing Committee in July had underlined that the department should come up with realistic tax targets and follow proper utilisation of allocated funds through effective financial management.
