InvestorQ : Is it true that the budget 2020 could see a Rs.2 lakh crore shortfall in revenue flows? Where the government went wrong in estimates?
Arya Nanda made post

Is it true that the budget 2020 could see a Rs.2 lakh crore shortfall in revenue flows? Where the government went wrong in estimates?

Answer
image
Deepa Salunkhe answered.
1 year ago
Follow

To be frank, the government is expected to go wrong on almost all fronts viz. direct taxes, indirect taxes and even divestments. India had set itself very ambitious tax targets in the previous year and finds itself far away from achieving these targets. It is now expected to be worst miss in revenues since the financial crisis of 2009. Central government had budgeted 25% increase in net tax collections for 2019-20 but till November the Centre’s tax revenue had only grown 2.6%. In the first eight months, the government has achieved just 46% of its tax target, and may be insufficient although a big chunk comes in the last quarter. Now the growth in the last 3 months will have to 119%, which is actually impractical.

Going by conservative estimates, India’s net tax collection could like see a shortfall of Rs. 196,000 crore, which needs to be bridged since the government has already committed to spending and is already run up a bill of Rs.145,000 crore on corporate tax cuts. Interestingly, HSBC sees a bigger miss and expects net tax collection to fall short of budget estimates by Rs.270,000 crore. A general economic slowdown, weak economic activity along with low tax buoyancy is expected to keep direct and indirect tax collections low. Specifically, GST collections have lagged growth targets by a huge margin. The government had set a monthly GST collection target of Rs 1 lakh crore for the current fiscal, something it managed to only achieve in four out of the first eight months. Customs duty collections, too, have been hit, falling over 12 percent till November. All in all, the revenues are likely to leave a deep hole for the government plans.


6 Views