Total Tax Collection Could Be Lower By 1.7% of GDP in FY20

Mumbai, November 22: Tax collection of the general government could be lower by as much as 1.7 per cent or Rs 3.7 lakh crore for the current fiscal year 2020.  As per the recent research by Motilal Oswal financial services, the tax receipts witnessed a decadal low of 2.4 per cent year on year (Y-o-Y) in the first half of the FY2020, while total spending grew by 8.7  per cent. During the same period, within total spending, the revenue spending and capital spending inched up by 9.3 per cent and 4.5 per cent (Y-o-Y) respectively. 

That said, the total receipts of the government (center plus 18 states) rose 19.1 per cent (Y-o-Y) in second quarter FY2020, thereby marking the fastest growth in five quarters as compared to negligible growth witnessed in the first quarter of FY2020. However total taxes increased only by 3.2 per cent (Y-o-Y) in quarter two, which was the same as in quarter one. While non-tax receipts grew much faster. 

“Overall, better growth in 2QFY20 led to an increase of 10.7 per cent (Y-o-Y) in total receipts in 1HFY20, marking the slowest growth in three years. As a percentage of budget estimates, general government total receipts were 41.5 per cent of budget estimates in 1HFY20, the lowest in the past five years,” the report pointed out. 

The report noted that as the center has guaranteed an approximate 14 per cent growth in tax collection for states by 2021-22. It is likely to be offset by the lower growth in tax receipts of states in FY2020, thereby facing additional burden on finances. 

“While the shortfall in states’ receipts would be lower than otherwise, tax collection of the government could be lower by as much as Rs 3.7 lakh crore or 1.7 per cent of the GDP. If so, the unchanged deficit target implies that fiscal spending growth could be only 13 per cent in 2HFY20 versus the target of 28 per cent,” concluded the report.