Due to the ongoing economic slowdown, lower than expected mop-up in GST and direct taxes, a cut in corporate tax, the government is likely to keep the revenue targets modest in the upcoming Union Budget 2020. The plan could instead be to focus on raising more resources through non-tax revenues. In December 2019, the GST mop-up stood at ₹1.031 Lakh Crore, falling short of the target of ₹1.1 trillion set by the finance ministry for the last four months of the current financial year.
A senior official from the Finance Ministry said, “The revenue targets are going to be conservative in the upcoming Budget, in sync with the current economic realities. The corporate tax reduction announced by the Finance Minister recently will also have its impact. So considering all factors do not expect high targets.”
The matter was discussed in the pre-Budget meeting with both the Finance Minister and in a meeting chaired by the Prime Minister with NITI Aayog and Economic Advisory Council. In the meeting, it was recommended that the government needs to take a realistic approach while setting targets in the upcoming budget.
For the current financial year, the government had pegged the tax revenue growth at 25.26%. However, in the wake of slowdown, lower than expected GST collections, and the government’s decision to reduce corporate tax rates, tax performance has been weak. Apart from facing a wider revenue deficit, the government is also likely to miss the revenue collection target.
For the current fiscal, direct tax collection target has been set to ₹13.35 Lakh Crore, which takes into account ₹7.66 Lakh Crore from corporate tax and ₹5.69 Lakh Crore as income tax. On the other hand, the Central GST collection fell short of the budgeted estimate by about 40% during the April-November period of FY20.