India’s tax collections in a slowing economy

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Published: June 8, 2019 12:53:24 AM

The new American vision, marked by clarity and simplicity, reiterates that the US is a Pacific power, a resident Asian power, and that the US ‘pivot’ is here in Asia to stay—with the Indo-Pacific identified as the ‘priority theatre’ of the American strategy

India's tax collections, india economy, GDP growth, gross tax revenue, GST collections, GDP growth level, personal income taxThe provisional estimates for FY19 show a shortfall of Rs 1.7 lakh crore from the revised estimates, with personal income taxes and GST collections contributing to most of the shortfall.

Given that overall tax collections grew just 8.4% year-on-year in FY18 as compared to the 18.4% budgeted, later revised to 17.2%, the government will have to tone down the tax revenue target for this financial year. A sputtering economy—GDP growth has slipped to a 20-quarter low of 5.8% in January-March 2019—cannot generate 23% growth in gross tax revenue as targeted in the Interim Budget, or a 34% growth in personal income tax.

The provisional estimates for FY19 show a shortfall of Rs 1.7 lakh crore from the revised estimates, with personal income taxes and GST collections contributing to most of the shortfall. The government will have to pare the tax targets in line with the nominal GDP growth level, which may increase the fiscal deficit.

In order to meet the fiscal deficit target of 3.4% in FY19, the government reduced the total expenditure by Rs 1.5 lakh crore from the revised estimates, of which revenue expenditure was slashed by Rs 1.3 lakh crore. Most of revenue expenditure trimming was on account of lower food subsidy bill. The government will have to resort to higher disinvestment and telecom spectrum auction in order to mop up more funds for spending.

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