Net tax revenue growth plunges to 12-year low in Telangana

HYDERABAD: Growth in net tax revenues fell to a decade-low of 2.94 percent in FY20, shows an Express analysis. The sharp decline in net tax collections, which exclude states’ share, perhaps explains the government’s reluctance to open up the money spigots and deploy an aggressive stimulus plan to aid economic recovery following the 68-day lockdown. 

It was in FY10 that we’ve seen growth in net taxes plunge to 3.63 percent. A year before, or during the year of global financial crisis in FY09, growth stood at an even dismal 1.86 percent. Barring these two years, the increase in net and gross tax collections grew at a healthy clip despite having a low tax base. 
For the NDA government, which has been in power since 2014, this is the third such instance when growth fell to single digits. In both FY16 and FY19, net taxes grew at a pale 4.4 per cent and 6 per cent respectively. Still, it was shades better than FY20’s 2.94 per cent.

Needless to say, a higher growth allows the government to flex its muscles and spur public spending — be it on social services or infrastructure. Data released by the Controller General of Accounts last week show that in absolute numbers, FY20 net tax collections printed at Rs 13 lakh crore against the revised budget estimate of Rs 15 lakh crore, translating into a shortfall of nearly Rs 1.5 lakh crore. Revised FY20 budget estimates peg gross tax collections, comprising income taxes, GST collections and others at Rs 21 lakh crore. Of this, states’ share stood at 30 per cent, or Rs 6.5 lakh crore. 

If you include states’ share, chances are the shortfall in gross tax revenue could be much higher than projections. But that’s not the most terrifying part. With the lockdown delaying economic recovery, which already dented tax revenue by a mile, analysts expect FY21 shortfall in net tax collections to be even sharper. A recent SBI Research estimate pegged the shortfall to be as much as Rs 4.12 lakh crore.  Even though the government projected net tax collections to grow by a modest 8.7 per cent in FY21, going by the actual collections, we need a growth rate of nothing less than 20 per cent this fiscal, which seems to be a tall task for now.