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Indirect tax mop-up may fall short by Rs 900 bn; report cites 2 reasons

This will imply CAD settling down at 2.6% of GDP (previously 2.8% of GDP), said the report

Press Trust of India  |  New Delhi 

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Indirect are likely to fall short by Rs 900 billion in the current financial year on account of subdued mop-up and cut on petroleum products, an SBI research report said Thursday.

According to the Budget Estimate, the government proposed to mop up Rs 7.4 trillion from the (GST) and Rs 2.6 trillion from Union excise duties.

was subsumed under GST, except on petroleum items and liquor & alcoholic products used for human consumption.

"We expect a shortfall of around Rs 900 billion in and excise collections, out of which Rs 105 billion is on account of reduction of on petroleum products by Rs 1.50 per litre," said SBI Ecowrap report.

Total collections come at Rs 6.78 trillion as compared with the 2018-19 Budget Estimate of Rs 7.44 trillion, including SGST and IGST. "If we exclude SGST and proceeds of IGST contributed to states, the GST collection of the Centre comes to Rs 3.46 trillion (47 per cent of BE)," the report said.

However, it added that customs collections may overshoot the budgeted amount (Rs 1.12 trillion) by Rs 140 billion.

The report further said that for the second year in succession, direct are likely to be higher than the budgeted targets by at least around Rs 200 billion. In addition to this, the government is expected to add another Rs 200 billion to its kitty from evaded taxes.

As per the report, the recent decline in oil prices might compress the (CAD) by around $5-6 billion from "our estimates of $78 billion in current financial year".

"This will imply CAD settling down at 2.6 per cent of GDP (previously 2.8 per cent of GDP)," it added.

Additionally, if crude oil averages $65 and the rupee stays at 70 against the dollar, then petrol and diesel prices could fall further on an average by Rs 4 or more.

This implies that diesel prices could head well below Rs 70 per litre and petrol well below Rs 75.

SBI expects inflation to hit 2.7-2.8 per cent in the next couple of months.

First Published: Thu, November 22 2018. 18:55 IST