12% tax revenue growth achievable in 2020-21 fiscal: Revenue Secy
A 12 per cent 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 per cent 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 ₹24.23 lakh crore for 2020-21. “In 2020-21 the nominal growth that has been projected is 10 per cent. So on a 10 per cent (GDP) growth, getting a 12 per cent growth in tax revenue is achievable,” Pandey told PTI.
The 2020-21 Budget has pegged gross tax revenues for 2020-21 at ₹24.23 lakh crore, up 12 per cent from ₹21.63 lakh crore in the current fiscal. Around ₹6.38 lakh crore is expected to come from personal income tax in 2020-21, a 14.13 per cent increase over ₹5.59 lakh crore earned in 2019-20.
Besides, corporate tax revenue is budgeted to increase by 11.63 per cent to ₹6.81 lakh crore in 2020-21, from ₹6.10 lakh crore in current fiscal. For current fiscal, the government has revised downwards the tax collection projections from budgeted ₹24.61 lakh crore to ₹21.63 lakh crore in the revised estimates.
Pandey said the revenue growth budgeted for current fiscal was calculated assuming a 12 per cent nominal GDP growth. However, the nominal GDP growth came in at 7.5 per cent. He said in the current fiscal, the gross tax revenue is 4 per cent higher than ₹20.80 lakh crore collected in 2018-19 fiscal. However, the government had estimated an 11 per cent gross tax revenue growth in 2019-20.
Explaining further, Pandey said, “This year we have shown a tax revenue growth of 4 per cent. 7 per cent growth we had to forego on account of corporate tax (cut). So 4 per cent (growth) means actually 11 per cent achievement. On 7.5 per cent nominal growth if you are achieving 11 per cent (tax revenue) growth, we cant say that this is unrealistic”.
In September 2019, the government announced a cut in base corporate tax for existing companies to 22 per cent from current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019 and starting operations before March 31, 2023, to 15 per cent from current 25 per cent.
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 per cent as compared to 34.94 per cent now. For new units, it will be 17.01 per cent as against 29.12 per cent now. The new tax structure cost ₹1.45 lakh crore in revenue annually to the exchequer. Indian economy is projected to grow at 5 per cent in the current fiscal — its slowest pace in 11 years. Fiscal deficit in 2019-20 is estimated to come in at 3.8 per cent as against 3.3 per cent estimated in Budget.