Garg in a blog said that from the tax revenues perspective, 2019-20 is proving to be a dysfunctional year.
"Tax revenues to see shortfall of Rs 2.5 trillion (1.2 per cent of GDP). Time to junk DDT and reform personal income tax," he said.
The government had budgeted gross tax revenues of Rs 24.59 lakh crore.
"Setting aside Rs 8.09 lakh crore as the share of the states, the budgeted net tax revenues to the Centre was kept at Rs 16.50 lakh crore. This was Rs 3.13 lakh crore higher than the provisional/actual net tax revenues of Rs 13.37 lakh crore collected in 2018-19, an increase of 23.4%.
"Indeed, it was quite a steep target," Garg noted.
He said corporate tax, excise duties and customs are likely to see negative growth in collections in 2019-20- something of the order of 8 per cent in corporate taxes, about 5 per cent negative growth in excise duties (Rs 2.2 lakh crore against Rs 2.31 lakh crore) and about 10 per cent lower collection in customs duty (Rs 1.06 lakh crore against Rs 1.18 lakh crore).
Garg pointed out that overall, there is likely to be shortfall of Rs. 3.5 - 3.75 lakh crore in gross tax collections of the Centre.
Noting that this is quite a steep shortfall in collections, unlikely to be bridged by either higher accrual under the non-tax revenues or expenditure compression, he said, "Therefore, revision of fiscal deficit goal of 3.3 per cent by 0.5 per cent to 0.7 per cent appears quite inevitable."
The underlying tax revenue situation is grim, he said adding that it is the right time to initiate much needed reforms in the taxation structure. BKS PRS MR MR