Fall in indirect tax collections to make a Rs50,000-cr dent in FY’16 revenue mop-up

05 Oct 2015


The revenue department has estimated a Rs50,000-crore shortfall in direct tax collections although rising indirect tax collections could offset the revenue fall and thereby meet the overall revenue projections for the current fiscal.

The shortfall in direct tax mop-up will be compensated to some extent by buoyant indirect tax collections, top finance ministry officials said.

Aggregate indirect tax collections, which has been growing at 37 per cent so far this fiscal, will help meet the gap and help achieve the overall tax revenue collection target of Rs14,50,000 crore, they said.

Direct tax collection during April-September recorded an increase of 12 per cent while indirect tax collections during April-August increased by 36.5 percent, the officials added.

"Our macro-fundamentals remain strong. We are now better placed to handle unforeseen external shocks and to put India firmly on the path of economic recovery and inclusive prosperity", finance secretary Ratan Watal said at a press conference that was also attended by other officials and chief economic advisor Arvind Subramanian.

Despite the gains on the indirect tax front, the revenue department is concerned over the fall in overall tax collections, which, according to revenue secretary Hasmukh Adhia, will fall short of the budgetary target by 5-7 per cent, mainly because of subdued growth in direct taxes.

The total tax revenues are likely to be around Rs14,00,000 crore in the current fiscal, as against the budget estimate of Rs14,50,000 crore.

Falling direct tax collections come amidst a pick-up in growth India's momentum that is expected to exceed 7.5 per cent in the current financial year.

"Despite the global slowdown and declining export demand, India has emerged as the fastest growing major economy in the world," said an official statement, adding that the government will continue to implement its reform agenda to realise potential growth rate of 8 per cent plus over time.

The twin deficits - fiscal and current account - have been reduced, he said, adding "the government is committed to achieving this year's fiscal deficit target as well as the fiscal glide path laid out in the budget".

Observing that the revenue collection target for the current fiscal was 16.5 percent as against 9.9 percent in the previous fiscal, Adhia said, "in a way the target looks to be ambitious, but the revenue position so far has been very very satisfactory".

"I am very hopeful that if there in no other externalities which come in, we should be able to achieve our target. Only the shortfall may be not more than 7 percent...May be around 5 percent shortfall may be there," he said.

Adhia said that growth in indirect taxes was a reflection on increasing demand and economic activity.

"Goods are being sold, goods are being consumed, they are being imported, people are paying excise on it, the service tax is also showing some kind of buoyancy. So all this is looking good," he added.

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