Coming year will pose several challenges on fiscal front: Economic Survey
The pre-Budget Economic Survey for 2018-19 says that the coming year will pose several challenges on the fiscal front with apprehensions of slowing of growth, which will have implications for reveneu collections.
In the Outlook in the chapter on Fiscal Developments, the survey, tabled by Finance Minister Nirmala Sitharaman in Parliament on Thursday, said secondly, the financial year 2018-19 has ended with shortfall in GST collections.
"Therefore, revenue buoyancy of GST will be key to improved resource position of both Central and State Governments." it said.
Thirdly, the survey points out that resources for now expanded Pradhan Mantri Kisan Sanman Nidhi (PM-KISAN) and Ayushman Bharat, as well as new initiatives of the new Government, will have to be found without compromising the fiscal deficit target as per the revised glide path.
Fourthly, the US sanctions on oil import from Iran is likely to have impact on oil prices and thereby on the petroleum subsidy, apart from implications for current account balances.
Finally, the survey said the Fifteenth Finance Commission will submit its report for the next five years beginning April, 2020. Its recommendation, especiallty on tax devolution, will have implications for Cemtral Government finances, it said.
On tax revenue, the survey said Directo Taxes have grown by 13.4 per cent owing to improved performance of corporate tax. However, indirect taxes have fallen short orf budget estimates by about 16 per cent. This is largely owing to the shortfall in GST revenues. The GST collections are yet to stabilise and several changes have been carried out following decisons of the GST Council during the course of the year.
These changes, among other things, relate to rate rationalisation for goods and services. changes in the threshold limits and exemptions granted.
Though there has been improvement in tax to GDP ratio over the last six years, Gross Tax Revenue (GTR) as a proportion of GDP has declined by 0.3 percentage points in 1018-19 provisional actuals over 2017-18.
Indirect taxes have fallen by 0.4 percentage points of GDP primarily due to to shortfall in GST collections.
This has been partly offset by 0.1 per cent points increase in direct taxes. Trends in major taxes in relation to GDP show that receipts from corporate tax have considerably improved in 2018-19 provisional actuals.
"Better tax administration, widening of TDS carried over the years, anti-tax evasion meas8ures and increase in effective tax payers base have contributed to direct tax buoyancy. Widenbing of tax base due to increae in the number of indirect tax fo;ters om tje GST regime has also led to improved tazx buyoancy.
"Going forward, sustaining imporovement in tax collection will depend o the revenue buoyancy of GST," the survey said.