Despite a major downward revision in the estimate for gross tax receipts, the Centre is staring at a shortfall of Rs 10,000-12,000 crore in collections, indicating a spending squeeze sharper than envisaged in the interim budget as the government is believed to have met the fiscal deficit estimate of 4.6% of gross domestic product (GDP).
The revised estimate (RE) of Rs 6.4 lakh crore for direct tax receipts seemed within touching distance on Monday, sources from the revenue department told FE, but added that on the indirect tax front, there could be a shortfall of at least R10,000 crore against the RE of Rs 5.2 lakh crore.
While the Union government accounts for April-February released on Monday showed the fiscal deficit to be 114.3% of the RE for the full year at R5.99 lakh crore, economic affairs secretary Arvind Mayaram said the deficit figure stood at 98% of the RE as on March 28.
This was doubtless achieved through a compression in expenditure comparable to last year in the last three-four months of the fiscal. Disinvestment proceeds exceeding the RE a bit also helped.
Monday's Controller General of Accounts (CGA) data revealed total expenditure in April-February was 88% of the RE at Rs 13.9 lakh crore.
The adverse impact of the economic slowdown on tax receipts is evident from the fact that after sharp downward revisions of budget estimates, the Centre is struggling to meet even the revised estimates. Gross tax collection in FY14 was initially budgeted to be 19.2% higher than the collections in the previous year at Rs 12.36 lakh crore, but the finance minister P Chidambaram revised the figure to Rs 11.59 lakh crore in the interim budget, which implied an annual growth of less than 12%. However, the revenue department, despite its aggressive crackdown on evaders, is struggling to meet even that relatively modest target.
In recent months, the government took several measures to boost tax receipts including stepping up scrutiny on personal income tax assessees and tightening rules to check indirect tax evasion. It also canceled leaves of its officials involved in tax collection till March 31. As on March 22, it had a direct tax shortfall of Rs 45,800 crore, which indicated officials had to collect about Rs 4.5 crore every minute.
The Central Board of Excise and Customs last week empowered chief commissioners to act tough on manufacturers and dealers who evade excise duty payments and abuse duty credit facilities. New rules expose tax evaders to the threat of losing Cenvat credit facility and the monthly payment option.
On disinvestment, what has been achieved was way below the budget estimate, but the actuals exceeded the revised target. After the partial SUUTI stake sale in Axis Bank and floating the CPSE ETF, proceeds from disinvestment crossed revised estimates by about Rs 3,800 crore at Rs 22,856 crore as on March 21. The budget estimate for disinvestment was Rs 54,000 crore and revised estimate, Rs 19,027 crore.
As part of spending cuts, the government deferred payment of Rs 40,000 crore of food subsidy and Rs 38,000 crore of fertilizer subsidy to the next fiscal. Upto February end, non-plan spending was limited tightly at Rs 9.9 lakh crore or 88.9% of revised estimate, while plan spending was curtailed at Rs 4 lakh crore or 86% of the revised estimate.