The two-month lockdown to contain the coronavirus pandemic has taken a heavy toll on the government’s indirect tax collections. For the month of April the goods and services tax collection fell a whopping 70% on a year-on-year basis, Business Today reports.
The Comptroller General of Accounts’ data for April 2020 show that the federal government’s share of tax collection during April was 167 billion rupees (US$2.21 billion) compared with 553 billion rupees in the previous year. The tax numbers announced by the government usually comprise collection by both the federal government and states. However, this time the accounting body’s data only shows the federal government’s share of the goods and services tax collection.
The dip is being attributed to the lockdown and the deferment of the goods and services tax payment period to June. However, it is to be noted that April tax collections are for March transactions, and the lockdown started from March 25. Therefore, the poor collection in April could be mostly due to the extension of return filing dates.
The government had earlier announced that if registered taxpayers pay their dues for March, April and June by the last week of June, no late fee or penalty will be charged. Traders with an annual turnover of less than 50 million rupees will not incur any interest charges, while for those exceeding this amount a reduced interest of 9% will be charged, against the current rate of 18%.
Meanwhile, the overall tax shortfall has driven the country’s annual fiscal deficit of the financial year to 4.6% of the nominal gross doemestic product, against the revised target of 3.8%. The excess of expenditure over receipts was 9.35 trillion rupees, while the government’s target was 7.66 trillion rupees.
In her budget, Finance Minister Nirmala Sitharaman had already used up the 0.5% escape clause to revise the fiscal deficit target for FY20 to 3.8% from 3.3%.
Total revenue for FY20 was 17.5 trillion rupees ($231 billion), or 90.6% of revised estimates of 19.32 trillion rupees ($255 billion), compared with 91.4% for the same period last year.
For April 2020, the fiscal deficit was 2.8 trillion rupees ($37 billion), and it is more than one-third of budgeted estimates for the entire FY21 of 8 trillion rupees ($106 billion). The nationwide lockdown was in force throughout April and this has led to a drastic contraction in revenue collections.