Finance Minister Arun Jaitley on Monday expressed hope that the Centre would be able to meet its fiscal deficit target in 2018-19 with improved tax buoyancy, including stability in receipts from the Goods and Services Tax (GST).

In Union Budget 2018-19, Jaitley pressed the pause button on fiscal consolidation with the deficit estimated at 3.5 per cent in 2017-18 and at 3.1 per cent next fiscal year. It was originally pegged at 3.2 per cent for 2017-18 and 3 per cent next fiscal.

Addressing the National Executive Committee Meeting of FICCI, the Finance Minister said the fiscal deficit target was being missed due to a shortfall in non-tax revenue (dividends from PSUs and the RBI and spectrum revenue) and receipts from GST for only 11 months (counting the April-June period, prior to implementation of GST).

No revenue in March

Noting that the accounting system had changed, Jaitley said that in the erstwhile indirect tax regime of excise duty and service tax, tax was paid in the month of the transaction. However, under GST, the tax is paid on the 20th of the next month. “This means we get 11 months of GST revenue in 2017-18,” he said. “The 0.3-percentage-point slippage in the deficit could be due to the ₹36,000 crore of missing GST revenue for the last month (March),” he said.

Expressing hope that the GST revenue collection cycle of 12 months will be complete in 2018-19, he said: “Sticking to fiscal deficit targets in 2018-19 would be easier compared to this year”.

The government would also be implementing two to three anti-evasion schemes in GST to boost revenue collections, which are dependent on self declaration at present.

The Minister also said that an across-the-board reduction in corporate income tax rates to 25 per cent may be possible only after all the tax exemptions are phased out.

“All exemptions have been grandfathered and if I write them off in advance, I would be accused of retrospective taxation,” he said recalling concerns over the Vodafone case involving retrospective taxation.

“We will let the exemptions die and then the potential of the Budget to lower corporate tax rates will expand,” he said.

Quoting data from the Income Tax Department, Jaitley said that following his Budget proposal to cut the corporate tax rate for companies with an annual turnover of ₹250 crore to 25 per cent, he said only 7,000 companies now remain in the top tax slab. “They pay only 22-23 per cent tax with the benefit of exemption. No prejudice is caused to them,” he said.

On inclusion of petrol and diesel in GST, he said States are not in the mood to include them. Efforts would be made to include natural gas, real estate and potable alcohol into GST at an earlier date, he said.