If this and the number of firms filing nil returns isn’t bad enough, direct taxes haven’t jumped post-DeMo either.

While it is early days, and companies are still grappling with the GST, the relatively low number of returns filed for July is disappointing. Of the approximately 60 lakh assessees who were supposed to file GSTR1 (sales) returns by October 10, only 46 lakh have done so. Even after accounting for some 2 lakh incomplete filings, as also those who would opt for the composition scheme or are B2C players, the gap would appear to be fairly high at close to 10 lakh assessees. Equally perplexing was the relatively high number of assessees who claimed their tax liability was nil in the returns filed by August 20. Of the 56 lakh summary returns that were filed, 40% or 22 lakh assessees claimed they were not eligible to pay any tax at all. Conceding this was a very big chunk of assessees, the government has decided to launch a survey to figure out whether this is genuine. There will be no searches or seizures; instead, the government hopes to get some information through consultations with taxpayers and other sources. Prima facie, it seems highly unlikely such a large number of firms attract no tax liability. Either way, it is important to get to the bottom of this to get a sense of whether the tax base is actually expanding. Given 26 lakh new taxpayers have come into the tax net, the GST collections should have seen much greater buoyancy. Possibly, the system will stabilise over the next few months and this will lead to a bigger mop-up in subsequent months. As of now, though, the mobilisation is subdued and there has been a shortfall in both July and August. Unless all glitches are ironed out in the next few months, the government could be staring at a shortfall in indirect tax collections vis-a-vis the budget estimate of `9.27 lakh crore for FY18.

While teething troubles were always to be expected in the case of GST, what is surprising is that even after demonetisation and the Operation Clean Money initiative, there doesn’t seem to be any exceptional buoyancy in direct tax collections either. Direct tax collections have risen 15.8% y-o-y in H1FY18 versus 8% in H1FY17 and 12.2% in H1FY16. But, if you keep in mind that the full FY18 budget growth target was 15.3%, the growth in H1 looks less impressive, more so when you consider the numbers put out on the suspicious deposits being tracked. A total of 18 lakh persons who made cash deposits that did not match their income profiles was talked of by the taxman at one point; another figure put the amount of suspicious deposits at `2.8 lakh crore, though it was always clear all of this was not black money. Investigations of this nature take their time, and it is possible the data mining by the tax authorities will give them enough information to collect taxes from tax-evaders. But, till then, it does look as if we could be staring at large tax shortages at the end of the year. With shortages in other revenues such as those in telecom, and the growth slowdown likely to lower nominal GDP, the deficit will almost certainly take a hit.