New Delhi, Feb. 28
THE Finance Minister, Mr P. Chidambaram, has said that the 20.91-per cent budgeted growth in the Centre's gross tax revenues was not unrealistic.
This is even as the revised estimates for the current fiscal show a shortfall of Rs 11,712 crore over the Budget Estimate, he told presspersons.
The Union Budget has for 2005-06 targeted growth rates (over revised estimates for 2004-05) of 30.06 per cent for income tax, 33.22 per cent for corporation and 20.66 per cent for excise revenues.
Considering that corporation tax collections in the current fiscal are expected to fall short of the budget estimate by Rs 5,436 crore and excise by Rs 8,479 crore, the targets for 2005-06 seem pretty stiff.
But according to Mr Chidambaram, the main reason for the shortfall in corporation tax proceeds is the lower profits of banks and oil companies. Banks' bottomlines were hit by falling bond yields, impacting their treasury incomes, while oil companies' earnings suffered because of product realisations not compensating for high crude prices.
Mr Chidambaram said the shortfall in excise, despite manufacturing a growth of 8.9 per cent, would have to do with exports growing by over 25 per cent this year.
Exports do not attract excise, thereby, not contributing to revenues.
The targets for income tax and customs were met or even exceeded.
"The idea of setting ambitious growth targets is to raise the bar sufficiently high so that the revenue department does not take things easy," he said.
If the Rs 317,733-crore revenue target is met, the Centre's tax-GDP ratio would hit 10.53 per cent and, for the first time, cross the pre-reform level of 10.12 per cent. The ratio had been declining consistently in the post-reforms period, a process that was arrested only in 2003-04.
Much of this has been due to lowering of import duties, leading to falling customs revenues, partly made up by higher excise collections and increased mobilisations from direct taxes (income and corporation). The share of direct taxes in the Centre's gross revenues is budgeted to touch almost 48 per cent in 2005-06.
Te duty changes announced in the Budget would "broadly revenue neutral" on the indirect taxes front, with losses on customs tariff reductions being offset by higher realisations from excise. He declined to give a break-up.
According to officials, the move to impose a 0.50-per litre cess on diesel and petrol would alone raise an additional Rs 3,500 crore.
The direct tax proposals would entail additional revenue mop-up of Rs 6,000 crore.
Mr Chidambaram said the imposition of a 0.015-per cent securities transaction tax in the 2004-05 Budget had helped raise revenues of Rs 100 crore a month.