Tax collections miss target by Rs 77,000 cr

REVENUE: Despite the massive shortfall this year, the Budget expects a growth of 19 per cent in tax collection over this year's RE

Hit by an economic slowdown, the government’s total tax collections in 2013-14 are projected to fall short of the target by about Rs 77,273 crore. Despite this massive shortfall, the finance ministry expects a total tax collection of Rs 1,375,798 crore in 2014-15, a growth of 19 per cent over this year’s RE.

The interim Budget documents laid in Parliament by Finance Minister P Chidambaram today showed that the finance ministry has failed to achieve the targets in direct and indirect taxes as laid out in BE. The government had set a Budget target of a 19-per cent jump in the tax mop-up this year too, but the collections as on March 31, 2014 are projected to show only a 11.6-per cent growth as per RE with GDP growth slowing down.

Asked whether the next year target of 19 per cent growth was too ambitious, the finance minister said  that the targets are always set high at the beginning of the year to encourage higher tax collections.

“Our tax-to-GDP ratio is still very low at 10.2 per cent. To improve this ratio we must collect more taxes,” he said in response to a query at his post-Budget press conference today.

Another finance ministry official said the collections fell short of the target as BE was set keeping in mind a GDP growth of 6.1-6.7 per cent in 2013-14. However the GDP growth is expected to be just 5 per cent. In 2014-15, the economy is expected to grow at 6 per cent.

The shortfall will be the highest in corporation tax at Rs 25,843 crore, followed by excise duty and service tax at Rs 18,016 crore and Rs 15,214 crore, respectively.

Despite not meeting its tax targets this year, the government is optimistic of buoyant tax collections in 2014-15, pegging direct tax collections at Rs 7,58,421 crore, against the 2013-14 RE of Rs 6,36,318 crore — a growth of 19.1 per cent. The growth will be led by a 27-per cent rise in personal income tax collections.

Indirect tax collections for the next financial year are pegged at Rs 6,17,377 crore, against the RE of Rs 5,19,520 crore — an increase of 18.8 per cent. The growth reflects a 30.6 per cent increase in service tax collections. All indirect taxes — customs, excise and services tax — are projected to cross the threshold of Rs 2,00,000 crore each neat year.

Last year too, the total tax collections had fallen short of the estimate by about Rs 40,000 crore. Both excise duty and customs collections fell short of the target by about Rs 22,000 crore each. Corporation tax collections also fell short of the target by over Rs 14,000 crore, while income tax collections exceeded the estimate by about Rs 10,000 crore.