Lower economic growth is likely to hit tax buoyancy in FY20, thus creating a stiff challenge for the government to achieve its tax estimates. Sources say the tax targets, particularly FY20 direct taxes, are looking difficult to achieve and also looking at the lower growth impulse.

Share Market Live

NSE

As of early September, direct taxes are growing at 5 percent against a budgeted growth rate of 17.3 percent, clearly indicating a wide gap between actual growth and the required rate to achieve the budget estimate.

The government has kept a direct tax target of Rs 13.35 lakh crore for FY20, which taxmen, even before the lower GDP numbers came out, have been viewing as ambitious. It’s noteworthy that in the interim budget on Feb 1, government had targeted Rs 13.80 lakh crore from direct taxes for FY20 which got scaled down to the current target as government missed the FY19 estimates by a wide margin in March end.

GST collections are also growing at 6 percent, against a required growth rate of 15 percent to achieve the FY20 budget estimates. Officials say the government needs to collect Rs 1.10 lakh crore to Rs 1.13 lakh crore a month to stay on course on GST collections, which hasn’t been the case at all so far. The current demand driven slowdown is expected to pose further challenges on the monthly collections.

With the slump in the growth rate of tax revenues, sources are not ruling out the possibility of government scaling down the FY20 budget tax aim by as much as Rs 1 lakh crore at the time of preparing the revised estimates of the Budget.

First Published:Sept 19, 2019 6:35 PM IST