Economy

Achieving targets: A taxing challenge

Updated : December 19, 2019 06:32 AM IST

Indirect taxes have contracted by 1.1 percent from April to October, thanks to a fall in consumption and imports.

The asking rate now is a 46 percent growth in indirect taxes.

The revenue department in the finance ministry has asked the central boards of direct and indirect taxes to deliver the budgeted tax revenues, despite the tax cuts.

Here are some numbers to elucidate the magnitude of the task.

If in the seven months from April-October, the tax department could achieve only a 3.6 percent rate of growth in taxes, will they be able to ensure tax collections grow at 28 percent in the remaining five months? A 28 percent rate of tax growth when nominal GDP is growing at 6.1 percent and corporate earnings at x percent in the first half.

While on the issue let us look at the indirect taxes – customs, excise and GST. Here goes:

All told, indirect taxes have contracted by 1.1 percent from April to October; thanks to a fall in consumption (hence lower GST) and imports (so lower customs collections).

The asking rate now is a 46 percent growth in indirect taxes.

And here is the full picture. Against a budgeted tax growth expectation of 15.4 percent, taxes have grown at 0.9 percent from April to October.

This means the revenue department has to ensure tax collections grow by over 25 percent in the remaining five months. Last year in the second half the nominal GDP grew by over 10 percent. This year 7-8 percent is a more realistic nominal GDP expectation. How will the taxman meet his target?