Lower than expected indirect tax and non-tax revenue will result in the government likely missing its fiscal deficit target for the year, according to India Ratings and Research.
“India Ratings and Research’s (Ind-Ra) calculation shows that the slippage in the Central government’s fiscal deficit in FY19 is likely to be ₹39,900 crore,” the agency said in a report. “Fiscal deficit in FY19 is estimated to be ₹6.67 lakh crore as against the budgeted ₹6.24 lakh crore. This translates into fiscal deficit/GDP of 3.5% for FY19 compared to the budgeted estimate of 3.3%. This means that FY19 will be the third consecutive year in which fiscal deficit/GDP will be 3.5%.”
The pressure on government finances, Ind-Ra said, is mainly arising from the revenue side and from indirect taxes and non-tax revenue in particular.
Indirect tax
“Ind-Ra’s estimate suggests a tax revenue shortfall of ₹22,400 crore, which is expected to originate from indirect taxes,” the report added. “Since July 1, 2017, a large portion of indirect tax collection has been subsumed in goods and services tax (GST). Although the introduction of e-way bills has helped the government plug leakages in GST collection, aggregate indirect tax collections (union excise duties, customs, service tax and GST) grew only 4.3% during the [first half of FY19] versus the budgeted growth of 22.2% for FY19.”
Further, in FY19, non-tax revenue is expected to be ₹16,200 crore lower than the budgeted estimate of ₹2.45 lakh crore.
“The shortfall in non-tax revenue is likely to emanate from lower dividend/profit pay out by the RBI/nationalised banks/financial institutions, lower non-tax revenue receipts from communication services, and lower disinvestment receipt,” Ind-Ra said.