12% Tax Revenue Growth Achievable In 2020-21, Says Secretary Ajay Bhushan Pandey
A 12 percent growth in tax collections next fiscal may look ambitious to some but for Revenue Secretary Ajay Bhushan Pandey it is achievable in an economy that is projected to clock a 10 percent nominal gross domestic product growth.
The economy slowing down to its slowest growth in 11 years together with a cut in corporate tax rates led to the government missing its tax collection target by a wide margin in the current fiscal. The tax shortfall also led to slipping on fiscal deficit target for the third year in a row.
In an interview to PTI, Pandey exuded confidence of meeting the tax collection target of Rs 24.23 lakh crore for 2020-21. "In 2020-21 the nominal growth that has been projected is 10 percent. So on a 10 percent growth, getting a 12 percent growth in tax revenue is achievable," Pandey told PTI.
The 2020-21 Budget has pegged gross tax revenues for 2020-21 at Rs 24.23 lakh crore, up 12 percent from Rs 21.63 lakh crore in the current fiscal. Around Rs 6.38 lakh crore is expected to come from personal income tax in 2020-21, a 14.13 percent increase over Rs 5.59 lakh crore earned in 2019-20.
Besides, corporate tax revenue is budgeted to increase by 11.63 percent to Rs 6.81 lakh crore in 2020-21, from Rs 6.10 lakh crore in current fiscal. For current fiscal, the government has revised downwards the tax collection projections from budgeted Rs 24.61 lakh crore to Rs 21.63 lakh crore in the revised estimates.
Pandey said the revenue growth budgeted for current fiscal was calculated assuming a 12 percent nominal GDP growth. However, the nominal GDP growth came in at 7.5 percent. He said in the current fiscal, the gross tax revenue is 4 percent higher than Rs 20.80 lakh crore collected in 2018-19 fiscal. However, the government had estimated an 11 percent gross tax revenue growth in 2019-20.
Explaining further, Pandey said, "This year we have shown a tax revenue growth of 4 percent. 7 percent growth we had to forego on account of corporate tax (cut). So 4 percent (growth) means actually 11 percent achievement. On 7.5 percent nominal growth if you are achieving 11 percent (tax revenue) growth, we can't say that this is unrealistic".
In September 2019, the government announced a cut in base corporate tax for existing companies to 22 percent from current 30 percent; and for new manufacturing firms, incorporated after Oct. 1, 2019, and starting operations before March 31, 2023, to 15 percent from current 25 percent.
The effective tax rate for existing units, after considering surcharges and cess such as Swachh Bharat cess and education cess - which are levied on top of the income and corporate tax rates, will be 25.17 percent as compared to 34.94 percent now. For new units, it will be 17.01 percent as against 29.12 percent now. The new tax structure costs Rs 1.45 lakh crore in revenue annually to the exchequer.
Indian economy is projected to grow at 5 percent in the current fiscal -- its slowest pace in 11 years. Fiscal deficit in 2019-20 is estimated to come in at 3.8 percent as against 3.3 percent estimated in Budget.