Former finance secretary, Subhash Chandra Garg, on Sunday, January 20, 2020, said that the government’s tax collection is likely to fall short of its estimate by Rs 2.5 lakh crore or 1.2% of GDP in 2019-20.

Garg said that 2019-20 is proving to be a dysfunctional year in terms of tax revenues. ‘Tax revenues to see a shortfall of Rs2.5 trillion (1.2% of GDP). Time to junk DDT and reform personal income tax,’ he said.

The government had budgeted gross tax revenues of Rs 24.59 lakh crore.

‘Setting aside Rs 8.09 lakh crore as the share of the states, the budgeted net tax revenues to the Centre was kept at Rs16.50 lakh crore. This was Rs 3.13 lakh crore higher than the provisional/actual net tax revenues of Rs13.37 lakh crore collected in 2018-19, an increase of 23.4%. Indeed, it was quite a steep target,’ noted Garg.

He said corporate tax, excise duties and customs will witness a negative growth in collections in 2019-20, something of the order of 8% in corporate taxes, about 5% negative growth in excise duties (Rs 2.2 lakh crore against Rs 2.31 lakh crore) and about 10% lower collection in customs duty (Rs1.06 lakh crore against Rs1.18 lakh crore).

Garg pointed out that in total, there is an expected shortfall of Rs 3.5 – 3.75 lakh crore in gross tax collections of the Centre.

Claiming that this is a sharp shortfall in collections, he said, ‘Revision of fiscal deficit goal of 3.3% by 0.5% to 0.7% appears quite inevitable.’

The underlying tax revenue situation is grim, he said adding that it is the correct time to start a much-needed reform in the taxation structure.

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