A 12% growth in tax collections next fiscal may look ambitious to some but for Revenue Secretary Ajay Bhushan Pandey it is achievable in an economy that is projected to clock a 10% nominal GDP growth.
The economy slowing down to its slowest growth in 11 years together with a cut in corporate tax rates led to the government missing its tax collection target by a wide margin in the current fiscal. The tax shortfall also led to slipping on fiscal deficit target for the third year in a row.
In an interview to PTI, Pandey exuded confidence of meeting the tax collection target of Rs 24.23 lakh crore for 2020-21.
"In 2020-21 the nominal growth that has been projected is 10%. So on a 10% (GDP) growth, getting a 12% growth in tax revenue is achievable," Pandey told PTI.
The 2020-21 Budget has pegged gross tax revenues for 2020-21 at Rs 24.23 lakh crore, up 12% from Rs 21.63 lakh crore in the current fiscal.
Around Rs 6.38 lakh crore is expected to come from personal income tax in 2020-21, a 14.13% increase over Rs 5.59 lakh crore earned in 2019-20.
Besides, corporate tax revenue is budgeted to increase by 11.63% to Rs 6.81 lakh crore in 2020-21, from Rs 6.10 lakh crore in current fiscal.
For current fiscal, the government has revised downwards the tax collection projections from budgeted Rs 24.61 lakh crore to Rs 21.63 lakh crore in the revised estimates.
Pandey said the revenue growth budgeted for current fiscal was calculated assuming a 12% nominal GDP growth. However, the nominal GDP growth came in at 7.5%.
He said in the current fiscal, the gross tax revenue is 4% higher than Rs 20.80 lakh crore collected in 2018-19 fiscal. However, the government had estimated an 11% gross tax revenue growth in 2019-20.
Explaining further, Pandey said, "This year we have shown a tax revenue growth of 4%. 7% growth we had to forego on account of corporate tax (cut). So 4% (growth) means actually 11% achievement. On 7.5% nominal growth if you are achieving 11% (tax revenue) growth, we can't say that this is unrealistic".
In September 2019, the government announced a cut in base corporate tax for existing companies to 22% from current 30%; and for new manufacturing firms, incorporated after October 1, 2019 and starting operations before March 31, 2023, to 15% from current 25%.
The effective tax rate for existing units, after considering surcharges and cess such as Swachh Bharat cess and education cess - which are levied on top of the income and corporate tax rates, will be 25.17% as compared to 34.94% now. For new units, it will be 17.01% as against 29.12% now.
The new tax structure cost Rs 1.45 lakh crore in revenue annually to the exchequer.
Indian economy is projected to grow at 5% in the current fiscal -- its slowest pace in 11 years. Fiscal deficit in 2019-20 is estimated to come in at 3.8% as against 3.3% estimated in Budget.
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