PC budgeting for taxhounds slowing down a tad in FY08

NEW DELHI: Finance minister P Chidambaram may peg growth in gross tax revenue at 17% when he presents the Budget proposals for 2007-08 next week. This is a notch lower than 19% growth in collections budgeted during the current fiscal. However, the government’s revenue collections this fiscal have been buoyant and the next fiscal’s growth would be on a higher base.

“The growth in tax collections would be pegged lower at 16-17% over the total tax collections for the current fiscal. However, it would not have an impact on collections as projections for the next fiscal would be based on a higher base. The gross tax collections are projected to grow 30% this year over the previous year’s collections,” an official source said.

As per Budget estimates of 2006-07, the gross revenue collections were pegged at Rs 4,42,153 crore, a growth of 19%. However, with booming collections, the target is likely to be exceeded by nearly 30% over the previous year (2005-06), or to Rs 4,95,000 crore.

Thus, the growth in 2007-08 will be over and above the revised estimate of gross tax collections for current fiscal, or over Rs 5,80,000 crore. The government is hopeful that the trend will continue in 2007-08 as well on the back of expected 9% growth in GDP, the source said.

While the government has budgeted GTR of Rs 4,42,153 crore for the current fiscal, it has already collected 70% of the amount, or Rs 3,06,527 crore, till December. With tax collections picking up during the last quarter of the fiscal, the collections are expected to far exceed the budget targets.

The source said that while a large part of GTR growth in the next fiscal would come from growth in direct tax collections, the cess on petrol and diesel is expected to contribute Rs 12,800 crore to the kitty. The education cess is also likely to be a major contributor to the GTR.

The growth in tax collections would also mean that all the flagship schemes of the government would be fully funded. Earlier, the government was toying with the idea of proportionately cutting allocations even for flagship schemes to maintain fiscal discipline and achieve the FRBM targets.

The other social sector scheme, Sampoorna Grameen Rozgar Yojana, is also expected to get its full quota of funds expected in the region of Rs 15,000 crore.

The grain procurement is also likely to increase during the next fiscal with the Budget expected to provide Rs 15,000 crore to Food Corporation of India to run its food-for-work programme. The allocation for externally-aided projects is likely to be fixed at Rs 9,699 crore, with a loan component of Rs 6,583 crore.