When the government has set the target to make India a $5 trillion economy as soon as possible it appeared not very unrealistic but an internal assessment by the Centre suggests that gross tax revenue collection for financial year 2019-20 is likely to fall short by around Rs 2 trillion from the budgeted estimate of Rs 24.6 trillion.

Sources said that the Fifteenth Finance Commission has shared this assessment informally with the concerned authorities and had asked the Union finance ministry to give a revised memorandum in the light of the current economic slowdown, tax trends and fiscal situation. For the financial year 2018-19, the gross tax revenue estimate was Rs 22.7 trillion. The previous financial year saw gross tax revenue shortfall of Rs 1.9 trillion.

Sources said that the shortfall was primarily on account of unrealistic revenue growth projections in budget estimates. Given the slowdown and the cut in corporate tax rates, not to forget below-expectation GST mop-up, collections could fall short of estimates.

Data from the Controller General of Accounts (CGA) suggests that gross central taxes grew 6.6% in the April-July quarter, as against 11.7% in the year-ago period. Direct tax revenue growth slowed from 6.7% to 5.8% during the period. Indirect tax revenue growth too slowed from 16.1% to 7.3%, while income tax revenue fell sharply from 11.3% to 6% during the period under consideration. Beating the trend, in the first four months of 2019-20 financial year, corporate tax revenues had grown 5.5%, faster than the 0.6% in the corresponding period of FY19.