Revenue target takes slowdown hit, melts 6.7%

REVENUE: Target revised to Rs 5,62,173 crore from Rs 6,02,935 crore.

The Interim Budget has revised downwards the revenue target for the current fiscal by 6.7 per cent to Rs 5,62,173 crore, compared with the earlier estimate of Rs 6,02,935 crore, due to the adverse impact of economic slowdown on tax collections and fiscal incentives given to boost demand in the economy.

For the fiscal 2009-10, it has projected an 8.4 per cent increase in revenue receipts at Rs 6,09,551 crore, compared with the revised estimate for the current fiscal. As expected, the budget has not tinkered with the tax rates or announced exemptions for any sector.

The downward revision in the revenue estimate for the current fiscal can be attributed to a sharp dip in excise duty collections owing to across-the-board duty cut of 4 percentage points in December to fight slowdown in demand, and slowdown in personal income-tax, corporation tax and Customs collections. Service tax is the only exception, which may see a marginal increase in collections in the current fiscal over the Budget estimate.

“This shortfall is primarily on account of the government’s proactive fiscal measures to counter the impact of global slowdown on the Indian economy. A substantial relief of about Rs 40,000 crore has been extended through tax cuts, including a fairly steep across-the-board reduction in Central Excise rates in December 2008,” said Finance Minister Pranab Mukherjee in his Interim Budget speech on Monday.

The net tax revenue for the current fiscal has been lowered 8 per cent at Rs 4,65,970 crore against the earlier estimate of Rs 5,07,150 crore. The Centre’s revenue receipts consist of two components: net tax revenue (that is tax receipts after giving states their share) and non-tax revenue.

Taking into account the tax sops and the economic, it has lowered the Customs and excise collection targets by 9 per cent and 21 per cent, respectively, for the current fiscal.

The gross tax revenue to GDP ratio has been revised downward to 11.6 per cent from the Budget estimate of 13 per cent for 2008-09. The Budget estimate for tax to GDP ratio is 11.1 per cent for 2009-10.

Non-tax revenue is expected to grow 16 per cent to Rs 1,11,955 crore in 2009-10 from the revised estimate of Rs 96,203 crore in the current fiscal.