tax changes to compensate for the reduction in the duty on fuel; Boost to tax collections more than budget target: Report
Mumbai:
According to a report, the change in import duty and unexpected tax on fuel exports will offset the reduction in duty on fuel and increase the total tax collection to Rs 20.70 lakh crore from the budget target for this fiscal.
The total tax collection in the budget has been estimated at Rs 19.35 lakh crore. But given that, these changes in customs duty on some imports and higher inflation-driven nominal GDP growth will lead to additional tax revenue of Rs 1.35 lakh crore for the government from the FY 2013 budget.
After the May 21 tax cut on fuel, the government has announced several fiscal policy measures to improve its revenue and contain the fiscal deficit.
On May 21, the government reduced excise duty on petrol and diesel by Rs.8 per liter and Rs.6 per liter, respectively, but on June 30 it increased import duty on gold from 10.75 per cent to 15 per cent; Petrol, diesel and aviation turbine fuels attract export duty of Rs 6/litre, Rs 13/litre and Rs 6/litre, respectively.
It also imposed an unexpected tax of 23,250 tonnes on crude oil production.
Assuming a GDP ratio of 7.5 per cent (as forecast in FY23 budget) and additional net revenue from these measures, tax revenue in FY23 could be Rs 20.70 lakh crore against the budget of Rs 19.35 lakh crore.
This means an additional tax revenue of Rs 1.35 lakh crore from the budget in FY23, the India Ratings report said.
However, the agency expects non-tax revenue to be under pressure due to potentially lower dividends and profits from central public sector enterprises. The budgeted non-tax revenue in FY23 was Rs 2.69 lakh crore, as against Rs 3.48 lakh crore in the previous fiscal.
Also, increased inflation means higher nominal GDP, which will help the government collect more taxes.
Similarly, public sector oil marketing companies are incurring huge losses on selling petrol and diesel.
At the current rate of under-recovery, they may be given a compensation of Rs 47,000 crore in this financial year.
The under-recoveries will also impact the margins of crude producers like Oil and Natural Gas Corporation and Oil India, resulting in lower dividend payout to the government. Another revenue shocker was the less than expected surplus transfer from the Reserve Bank.
Payment from the central bank was only 69.4 per cent over the previous year.
Overall, the agency expects non-tax revenue to be about 5 percent below the budgeted amount for FY13.
However, the agency does not believe that the government will face much difficulty in achieving its target of Rs 65,000 crore of disinvestment receipts for FY13 as it has already collected Rs 24,000 crore in April-May, which is Rs. 37 percent of the target for FY 2013.
On the expenditure front, there will be an increase in expenditure on fertilizer subsidy in FY13 from the budget of Rs 1.05 lakh crore for FY13, which was Rs 1.53 lakh crore in FY12.
However, the global prices of fertilizers increased by 113.59 per cent in the first quarter of FY12 from 57.44 per cent in the full FY12. Following this massive spike, the government increased the fertilizer subsidy from Rs 1.1 lakh crore to Rs 2.15 lakh crore in FY23.
The government has also increased the subsidy on LPG cylinders by Rs 6,100 crore.
All these measures will lead to an increase in revenue expenditure of Rs 1.16 lakh crore in FY 2013, from Rs 32.01 lakh crore in FY 2012 to Rs 33.10 lakh crore as against the budgeted Rs 31.94 lakh crore.
Revised revenue receipts and expenditure indicate that the government will generate Rs 5,875 crore more revenue in FY13 than budgeted. As a result, the revenue deficit will shrink by about 20 bps to 3.65 per cent of GDP as compared to the budgeted 3.84 per cent.
On the other hand, if the government uses this reduction in revenue deficit to increase capital expenditure, the capital expenditure will increase from Rs 7.50 lakh crore to Rs 7.56 lakh crore, and the fiscal deficit will remain at Rs 6.4 lakh crore of GDP.
In such a scenario, the capex/GDP ratio would be 2.8 lakh crore, which is less than the budgeted 2.91 per cent due to higher nominal GDP in FY23.
But if the government does not increase capital expenditure, the fiscal deficit to GDP ratio will come down by 30 bps to 6.1 per cent, from 6.4 per cent in FY23.