On January 7, the central government projected the country’s economy to contract by 7.7 percent in the current fiscal year 2020-21, as per the first advance estimates of gross domestic product released by the National Statistical Office
Though capital expenditure increased modestly in November, the fiscal deficit already reached 135 percent of Budget Estimate (BE) till November, owing to weaker revenues.
“Corporate taxes collections so far are only 27 percent of BE and income tax are only 37 percent of BE. The higher excise duties 74 percent of BE have provided some respite to government revenues. Meanwhile, GST (Goods and Services Tax) collections are also below the budget estimates of Rs 6.9 lakh crore,” State Bank of India, said in a report.
There would be an overall shortfall in GST collection of Rs 1.44 lakh crore for Centre, which in turn limits the expenditure that the government can incur looking ahead, the report said.
The report said that states have borrowed 41.5 percent more than last year till now, though the gap between last year and this year’s cumulative revenue is narrowing as GST collections have improved.
“As per our projections, if 50 percent of the IGST (Integrated GST) collected is disbursed to sates by Mar’21, then state GST shortfall can narrow down to around Rs 25,000 crore after taking into account the full compensation cess,” the report said.
However, the April-December average allocation shows that states have got only 31 percent of the allocated IGST. The report said that if the centre kept 60 percent of the IGST revenue, then the states could be staring at a shortfall of around Rs 79,000 crore.
“This can help them in maintaining their expenditure, which was budgeted at Rs 33.27 lakh crore for FY21,” the report said.
On January 7, the central government projected the country’s economy to contract by 7.7 percent in the current fiscal year 2020-21, as per the first advance estimates of gross domestic product released by the National Statistical Office.
The agriculture sector estimate for FY 2021 stood at 3.4 percent. Mining is estimated to contract to 12.4 percent for FY21 against 3.1 percent (YoY), and nominal GDP estimate stood contract to 4.2 percent.
“The movement of various high-frequency indicators in recent months, points towards broad-based nature of resurgence of economic activity. The relatively more manageable pandemic situation in the country as compared to advanced nations has further added momentum to the economic recovery,” the government said in a press release.
Also Read: How systematic changes led to record GST mop-up in December, 2020
Source: moneycontrol.com
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Frah Saeed is a law graduate specializing in the core field of indirect taxes and is the Co-founder of taxwallah.com. She has authored many publications on GST and is into full-time consultancy on GST to big corporates. She as a part of taxwallah.com heads a team comprising of Chartered Accountants and Advocates and plays a key role in our mission to disseminate GST knowledge to all.
