Millennium Post

Tight revenue position may rule out sops in Budget

New Delhi: Given the tight revenue position of the government, Union Budget 2020-21 may not be giving out any extraordinary fiscal sops just to boost personal income to push consumption and demand and would be taking a sectoral redressal policy where interventions are needed, officials said.

"Government is not averse to put growth as a top priority over fiscal prudence and spending will happen where it has a direct bearing on the consumption and demand. Income Tax rejigs have been sought by the industry, but the government is not convinced so far that it may lead to any surge in consumption that's the need of the hour on the supply side", said an official, adding after income tax cuts (if it happens) government fears people may just save and not spend, defeating the entire purpose taking a huge risk on direct tax front when it is not on a promising trend.

"There is little fiscal headroom unless government takes a huge risk in tax cuts further after giving corporate tax cuts in September in Rs 1.45 lakh crore outgo. That has so far not shown any result", said officials while adding we have to wait till fiscal ending to be through the lag period to see impact on corporate tax cut benefits.

But the Finance Minister has said direct tax revenues are on the rise.

Replying to a debate on Taxation Law Amendment Bill, 2019 in the Lok Sabha, Finance Minister Nirmala Sitharaman categorically said earlier this month there is no decrease in direct tax collection.

Gross direct tax collection rises by 5 per cent till November. Historically, maximum collection of direct taxes happens in the last quarter of the fiscal, she added.

The government's hands are tied by the so far lacklustre performance of the sell-off revenues where only Rs 17,354 crore has been achieved of a target of Rs 1.05 lakh crore and it is highly unlikely that global bidders will look at Finance Ministry target of March 31 timeline for buying BPCL or Indian bidders for Air India, in fact these two CPSEs have not even issued Expression of Interest so far.

The finance ministry had already asked other ministries to be prudent in the demand of budget and had asked them to prepare their grant request according to the 'current economic' realities. There are many schemes of the government where there may not be any hike at all despite they being marquee ones like Ayushman Bharat, officials said.

As per a presentation made to the GST Council, the compensation requirement for states is expected to be about Rs 1.6 lakh crore for the ongoing


The Centre may have a shortfall of over Rs 60,000 crore in GST compensation cess collection due to slowdown in revenues and facing heat over delay in payment of GST compensation, the central government on December 16 released Rs 35,298 crore to states to make up for the loss of revenue due to rollout of the Goods and Services Tax (GST).

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