Flat advance tax not to upset govt fiscal deficit target

Subsidies may affect fiscal math but income declaration scheme-2 and raids keep receipts flowing

Even as the cash crunch following demonetisation hit advance tax collections for the quarter ending December, economists say the fiscal deficit target of 3.5 per cent of gross domestic product for this financial year (FY17) is not a difficult one to achieve.

The cash crunch caused by demonetisation dented advance tax numbers, with some fast-moving consumer goods companies and banks reporting a year-on-year decline. 

Indirect taxes have also been hit by demonetisation, but these were camouflaged by higher numbers in the months prior to November, additional revenue measures of the government which included an increase in service tax rate from 14.5 to 15 per cent in this financial year.

Subsidies are ought to affect the fiscal math but the income declaration scheme-2 and raids are keeping the receipts flowing. 

Pradhan Mantri Garib Kalyan Yojana or the income declaration scheme-2 (IDS-2), in popular parlance, and raids on various entities to unearth black money may offset the shortfall in tax collections. Experts are optimistic despite the fact that IDS-1, which was expected to fetch the government Rs 7,500 crore by November 30, managed only Rs 6,800 crore, reports Business Standard.