Tax revenue growth of 12% over the next fiscal year may seem ambitious for some, but Finance Minister Ajay Bhushan Pandey can do so in an economy that forecasts nominal 10% GDP growth.
The slowdown in the economy to the slowest growth in eleven years, together with a reduction in corporate tax rates, meant that the government clearly failed to meet its tax collection target in the current financial year. The tax deficit also resulted in the budget deficit target being missed for the third year in a row.
In an interview too PTIMr. Pandey exuded confidence to meet the tax collection target of 24.23 Lakh Crore for 2020-21.
“A nominal growth of 10% was forecast in the period 2020-21. With growth of 10% (GDP), tax revenue can be increased by 12%, ”said Pandey PTI,
The 2020-21 budget estimates gross tax revenues for 2020-21 at £ 24.23, up 12% from £ 21.63 in the current financial year.
Income tax is expected to be around £ 6.38 in 2020-21, up 14.13% from £ 5.59 in 2019-20.
In addition, corporate tax revenue is estimated to increase by 11.63% to GBP 6.81 billion in 2020-21, compared to GBP 6.10 billion in the current financial year.
For the current fiscal year, the government has revised the tax collection projections down from the budgeted 24.61 lakh crore to 21.63 lakh crore in the revised estimates.
According to Pandey, the revenue growth forecast for the current financial year has been calculated on the assumption of nominal GDP growth of 12%. However, nominal GDP growth was 7.5%.
He said that gross tax revenue in the current fiscal year is 4% higher than the £ 20.80 raised in fiscal year 2018-19. However, the government had forecast gross tax growth of 11% for 2019-20.
Mr. Pandey said: “This year we have seen tax revenues grow by 4%. We had to give up 7% growth due to corporate tax (cut). 4% (growth) actually means 11% performance. With a nominal growth of 7.5%, we cannot say that this is unrealistic if you achieve 11% growth (tax revenue). "
In September 2019, the government announced a reduction in corporate tax for existing companies from currently 30% to 22%. and for new manufacturing companies that were founded after October 1, 2019 and started operating before March 31, 2023, to 15% from the current 25%.
The effective tax rate for existing units will be 25.17% after considering surcharges and charges such as Swachh Bharat tax and education tax – which are in addition to income and corporate tax rates – compared to 34.94% now. It will be 17.01% for new units, compared to 29.12% now.
The new tax structure cost the Treasury £ 1.45 billion in revenue annually.
The Indian economy is expected to grow by 5% in the current fiscal year – the slowest growth in eleven years. The budget deficit for the 2019-2020 period is estimated at 3.8% compared to 3.3% in the household.