The government is facing the possibility of falling short of its gross direct tax collection targets in the wake of the economic slowdown with the mop-up during the first nine months of the current financial year rising 12.3% to Rs 4.8 lakh crore.
The current run rate is much slower than the 18.1% growth target for corporation tax, personal income tax and wealth tax that finance minister P Chidambaram had fixed in the Budget. The government is now left with two possibilities: Either lower the target when Chidambaram presents the revised estimates in the next few weeks or step up its collection drive, which officials concede may be a tough task, given the extended period of slowdown. While a lower revised estimate is a possibility, it makes the task of meeting the fiscal deficit target more difficult, although Chidambaram and his team managed to do so in 2012-13 by cutting down expenditure across ministries.
Already, there are indications that ministries have been asked to surrender their allocations wherever they have failed to spend the money allocated to them at the start of the year. The move comes at a time when the Centre has reached 94% of its annual fiscal deficit target at the end of November.
Latest data released by the finance ministry showed that corporation tax was the biggest laggard, with gross collections going up by 9.4% to Rs 3.1 lakh crore during April-December 2013. This comes against a target of almost 17% for the financial year. Similarly, gross collection of personal income tax was up 18.5% at a little under Rs 1.7 lakh crore, compared to the asking rate of over 20% for the financial year. Net direct tax collection, which includes refunds and transfers to the states, was estimated to have gone up by over 12.5% to Rs 4.15 lakh crore, the finance ministry said in a statement.