March GST higher than expected, direct tax collection jumps
A push on tax collection for the financial year 2018-19 at the very last moment appears to have closed some of the gaps between revenue projections and collections. Direct tax collection has fallen short nevertheless. Altogether, Rs 11.5 trillion has been collected at last count, which is Rs 50,000 crore short of the target of Rs 12 trillion. That was the revised target; the original target, of Rs 11.5 trillion, has apparently been met. This reflects a sharp increase in the takings during the last few days — as late as March 26, direct tax collection was only Rs 10.3 trillion. Sixty per cent of that was corporate tax and the remainder personal income tax. In other words, 10 per cent of the direct tax revenue was collected in the last few days. This could be considered somewhat worrying. It indicates the tax department will have pushed banks for excess collection of tax deducted from interest revenue, for example. Public sector companies and banks are particularly susceptible to such pushing from the government and the tax authorities and may well have collected more advance tax than necessary, which will then have to be refunded or adjusted in the current financial year.
If indeed there has been over-collection of taxes, which would have to be subsequently adjusted, then it is clearly bad practice. The incentive to do so is understandable. It would make it easier to meet fiscal targets in a particular year — at least on paper. However, the fiscal deficit so achieved would obviously be deceptive. It would not correctly reflect the difference between actual revenue and actual expenditure. In addition, it is a great inconvenience for business. Paying excess advance tax locks up scarce capital that businesses would need. The government should not resort to such tactics to make its books look better.
The government was concerned that the goods and services tax, or GST, would come in too far below expectations. In the end, GST collection in March 2019 was the highest for any one month in the 21 months since the new indirect tax regime was rolled out. The Union finance minister has argued this reflects an expansion in “both manufacturing and consumption”. However, whether this represents a strong and sustainable take-off in the economy is not certain, since there are not that many other high-frequency indicators that support such a notion. However, this is nevertheless good news that also takes the revenue from the GST in 2018-19 up to Rs 11.8 trillion. Earlier, there were concerns that the GST was going to come in Rs 1 trillion short, but now it may be only Rs 75,000 crore short of original expectations. Altogether, when seen together with the strong March collection of direct taxes, making the fiscal deficit target of 3.4 per cent of gross domestic product appears more likely than earlier. That said, it is clear that the fiscal position is still far less transparent than it should be, as a consequence of the possibility that there is an excess advance tax collection.
via Last push for tax | Business Standard Editorials