Revenue deficit a worry despite tax mop-up

The government is "worried" over revenue deficit, which has shot up to 82.6 per cent of the Budget target, but also sees tax collections looking up in the second half of this fiscal, a finance ministry official said.

"What is worrisome is the revenue deficit that shot up to Rs 62,906 crore during April-August. The higher revenue deficit is mainly due to the lower than expected tax collections," the official said, adding the deficit was expected to come down with improvement in tax collections in the second half.

"Fiscal deficit was relatively lower till August because of a spurt in capital receipts," he said, indicating that it would be restricted to the targeted 4.4 per cent of the GDP in 2004-05.

Although fiscal deficit was up 21 per cent to Rs 52,509 crore in the first five months of 2004-05, compared to Rs 43,467 crore during the year-ago period, it was only 38.2 per cent of the Budget estimate of Rs 1,37,407 crore for 2004-05. Apart from higher capital receipts, the official said, "expenditures are under control so far."

The government has recently announced a set of austerity measures to curtail spendings of different departments and to get higher mop-ups in terms of dividends from the public sector units. Tax collections grew 19 per cent to Rs 1,14,400 crore till September against the expectation of 40 per cent growth, the official said.

He said tax collections were set to improve from October as the securities transaction tax, a hike in the service tax rate and an extension of the tax to more items, and additional revenue mobilisation (ARM) measures come into play.

The government expects about Rs 1,000 crore from the securities transaction tax collections that was started at major bourses from October.

With buoyancy in the stock market, the finance ministry expects a good response from the new tax on equities. The service sector continues to grow over 8 per cent, which has raised hopes of attaining the service tax target of Rs 14,500 crore in 2004-05.

During the first five months, service tax collections were lower at about Rs 4,100 crore as the new rate and roping in of 12 more services under the tax net came into effect only after the Finance Act got the President's assent on September 10.

The central government's tax collections grew only 19 per cent to Rs 1,14,400 crore in the first half of this fiscal, mainly due to the lower than expected mop-up in corporate tax, excise and Customs duties.

While direct taxes grew by a robust 35.4 per cent to about Rs 44,800 crore, the indirect tax mop-up was sluggish at 9.5 per cent to Rs 69,611 crore during April-September 2004-05.

The income-tax mop-up was higher by 74 per cent to about Rs 24,700 crore during April-September 2004, they said.

Corporate tax collections were lower than expected at Rs 20,100 crore, showing a mere 5.8 per cent growth.

The excise mop-up stood at Rs 44,463 crore till September this fiscal, which is 10.3 per cent higher than Rs 40,409 crore in the year-ago period, he said.

Customs collections were at Rs 25,148 crore in the first six months of 2004-05, up 8.5 per cent from Rs 23,167 crore in the year-ago period.