Some of the reliable sources at income tax department have revealed that tax officials are likely to ask for a 6% reduction in GST return collection target in the full Union Budget for the FY 2019-20, in comparison to what has been announced during the Interim Budget earlier this year. The demand of 6% reduction directly relates to a reduction of INR 1.5 trillion in return collection target.
The recently appointed finance minister, Nirmala Sitaraman, has also expressed her concern over the return collection with senior tax officials in their meeting.
Both the direct and indirect tax departments are responsible for meeting the return collection targets. As of now, it is highly anticipated that a cut of around INR 60,000-70,000 crores or 4.3 to 5.1% of the figure is going to be asked by the direct tax department officials from their collection target in the Union Budget 2019-20. Overall yearly growth of 15% in tax collection target has been proposed in the earlier interim budget. However, if the finance ministry approves the reduction request in tax collection target, then the revised tax collection target limit would hover somewhere around INR 13 trillion, from earlier 13.8 trillion.
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As far as indirect taxes are concerned, a cut of around INR 70,000-80,000 crore is expected from the central goods and services tax (CGST) growth target in the full budget or an 11.5 to 13% of the interim budget CSGT growth target. Assuming a realistic growth of 17 to 20% from the previous year’s collection, one can easily expect 35% growth barring the target remains unchanged.
Earlier in the interim budget presentation this year, the CGST collection target for FY 2018-19 has also been curtailed by INR 1 trillion.
Despite this, the tax collection fell short by INR 40,000 crores. Again, if we talk about the gross or actual total (direct and indirect) tax collection for FY 2018-19, it fell short by approx INR 1.7 trillion or 7.5% of the revised target given in the Interim Budget for the same year.
The recent slowdown in economic growth coupled with poor tax collection performance of last year makes the tax collection target for FY 2019-20 also highly unachievable, as hinted by officials. If we talk about the net collections (post devolutions of states) for FY 2018-19, then it fell short by INR 1.6 trillion or 11% of the revised target.
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The tax officials also said that government itself is expecting the economic slowdown to continue till the first quarter (April-June) of FY 20, and given the circumstances, it is highly unlikely that annual revenue position will move ahead expect a drastic pickup in economic growth.
