Exclusive | Tax shortfall in 2020-21 likely to be around Rs 2.5-3 lakh crore: Sources

The strong economic revival in the second half of the year so far could mean that the centre’s gross tax revenue shortfall in the financial year 2020-21 could be the same as 2019-20 that was also hit by a slowdown but without the spectre of the Covid-19 pandemic.

Moneycontrol has learnt from senior government sources that based on the trends seen so far, the gross tax revenue shortfall this year is likely to be around Rs 2.5-3 lakh crore.

Finance Minister Nirmala Sitharaman, in her Union Budget 2020-21 had projected gross tax collections to be at Rs 24.23 lakh crore. For 2019-20, the revised estimate for gross tax receipts was Rs 21.63 lakh crore, short of that year’s budget estimates by Rs 2.98 lakh crore.

After accounting for refunds and devolution to states, the net tax collection shortfall in 2019-20 was Rs 1.45 lakh crore.

"Even after the nationwide lockdown was lifted and businesses started coming back, we were estimating that the tax shortfall might be very high because it's a pandemic year. But things have changed in the last few months. We are hoping that the shortfall may not be as bad as it was being feared initially," a government official told Moneycontrol.

Also Read: I-T refunds worth Rs 1.45 lakh crore issued to 89 lakh taxpayers

However, the official said the December advance tax collections, expected in the coming week, will finally determine how much the shortfall for this year will be.

As per data available with the Controller General of Accounts, net tax revenue collected in the April-October 2020-21 period stood at Rs 6.91 lakh crore, which is 34.2 percent of the budgeted amount, against 46.2 percent collected in the same period a year ago. October net tax collections of Rs 1.41 lakh crore were higher than the same month last year for this first time this fiscal year.

For the first time this year, Goods and Services Tax or GST collections crossed Rs 1 lakh crore in October. Total GST collections in October grew 10.2 percent on year to Rs 1.05 lakh crore in October. GST collection for November stood at Rs 1.04 lakh crore.

The IHS Markit Manufacturing PMI rose to 58.9 in October, the highest in more than a decade, compared to 56.8 in September. Driven by robust sales, the pace gathered by manufacturing output - a crucial component of the headline PMI - was the quickest since October 2007, contributing to the PMI’s gains.

Passenger vehicle wholesale in India increased by 14.19 percent to 3,10,294 units in October against 2,71,737 units in the same month last year as companies despatched more units to dealers to cater to enhanced demand in the festive season.

"Whatever assessment of the target needs to be made would be possible once we see what kind of advance tax comes in December. After that we'll be able to understand," the official said.

The government's fiscal deficit rose to Rs 9.14 lakh crore, about 114.8 percent of the annual budget estimate, during the first six months of the current financial year, mainly on account of poor revenue realisation.

The revenue realisation during the current fiscal suffered on account of the lockdown imposed by the government to check the spread of coronavirus pandemic.

The fiscal deficit or gap between the expenditure and revenue had breached the annual target in July this year. The government had pegged the fiscal deficit for 2020-21 at Rs 7.96 lakh crore or 3.5 percent of the gross domestic product (GDP) in the Budget.

That is now expected to more than double as expenditure commitments also rise and nominal GDP, against which fiscal deficit is measured, is expected to fall significantly. The Reserve Bank of India projects real GDP for 2020-21 to contract by 7.5 per cent.

Fiscal deficit had soared to a seven-year high of 4.6 percent of the GDP in 2019-20, mainly on account of poor revenue realisation, which dipped further towards the close of March because of the lockdown.