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A slowing economy, recession in the Euro Zone and dim prospects of global output growth have prompted the Finance Ministry to scale down its optimism on direct tax revenues for the current fiscal.
The Finance Ministry is now looking to achieve the Budget Estimate for direct taxes and not the internally hiked target of October last year, a senior official said.
Hiked by 10%
The direct tax revenue target was internally hiked by 10 per cent based on the suggestions of the Finance Minister, Mr Pranab Mukherjee. This meant the Income-Tax Department had to collect Rs 53,000 crore more this fiscal, taking the overall target to Rs 5.83-lakh crore. Now, the Finance Ministry has scaled back its target to the Budget estimate level of Rs 5.3-lakh crore.
The upward revision in October was intended to bridge the revenue shortfall that was expected due to a reduction in Customs duty on crude oil. With the indirect tax collections well on course to meet the Budget Estimate despite the huge giveaway of Rs 36,000 crore in the form of petro duties, the scaling down of the direct tax target will not hurt the fisc, sources said.
Fiscal gap
The real pressure on the fisc this year is going to come from increased spend on food, fuel and fertiliser subsidies and not from the prospect of lower revenue mop-up. With no windfall gains like the over Rs 1-lakh crore earned from sale of 3G and wireless broadband spectrum in 2010-11 coming the Government's way, the fiscal gap for 2011-12 will not be a very happy picture, say economy watchers.
One estimate put the likely fiscal deficit as a percentage of GDP for current fiscal at about 6 per cent, much higher than the Budget 2011-12 specified target of 4.6 per cent.
Meanwhile, the Centre is hopeful of squeezing out an additional dividend of Rs 7,000 crore from cash-rich public sector entities. Taken together with the Rs 1,500 crore of dividend distribution tax, the additional mop up would aggregate to Rs 8,500 crore.
For the current fiscal, the Centre had budgeted a dividend mop up of Rs 23,495 crore from public sector enterprises. It had collected Rs 25,978 crore under this accounting head in the previous fiscal.
Adding pressure to the revenue mop-up efforts is the somewhat poor show on the disinvestment front.
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