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Tax collection set to surpass revised budget estimate
March, 09th 2011

The government's tax revenue this fiscal is set to exceed its own upward revised estimate presented in the Budget for 2011-12. The higher tax collection will help the government meet with ease the extra spending it sought in the third supplementary demand tabled in the Parliament on Friday. "We expect an additional 10,000- 15,000 core," said a finance ministry official.

By the end of February, the government had collected 79.8% of the 2010-11revised tax estimate of 7.87 lakh crore, the official said.

Since a sizeable chunk of tax comes in March - the last month of the financial year - the government is confident of raising more revenue than projected in the revised estimates.

In 2009-10, 21.7% of the total tax revenue for the fiscal was collected in March. This suggests that the government is firmly placed to better its revised estimate having raised nearly 80% of the tax in the first 11 months of the year.

Customs collections may jump the highest due to rise in crude oil prices and higher imports.

In its revised estimate, the government had projected a 14.6% rise over the budget estimate under this head. As on February 28, the tax department had collected over 90% of the revised estimate.

The government has proposed an extra expenditure of over 12,000 crore in its third supplementary demand for grants, which was not mentioned in the revised estimate presented in the Budget.

Though it has suggested that the extra expenditure will be met from savings elsewhere, the additional revenue will provide it the much needed cushion.

The finance ministry has budgeted a fiscal deficit of 5.1% of gross domestic product (GDP) in the current fiscal. The extra revenue will help it remain within the deficit even if there is some slippage on the expenditure.

The Budget for the next year has set an ambitious target of a further 18.5% rise in tax revenue.

BNP Paribas has questioned the tax buoyancy ratio (tax revenue growth to nominal GDP growth) of 1.3 times GDP, as it is higher than the average of 1.2 times over FY04-11. "In particular, the corporate and income tax revenue growth estimate of 21.5% year-on-year, without any increase in tax rates, appears slightly aggressive," its experts said in a recent note.

The government, however, is confident of meeting this high target despite corporate profits being under stress because of the sharp rise in inputs costs.

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