FM to collect Rs 6 lakh crore

In an unexpected windfall for P. Chidambaram, there has been a surge in gross tax revenue collections, which are likely to cross the Rs 6,00,000-crore-mark in 2007-08.

Windfall for Chidambaram A strong economy and better compliance have made the FM's job easier. Gross tax collections likely to cross Rs 600,000 crore Surge in personal income tax, corporation tax and service tax collections Surplus revenues likely to be spent on infrastructure projects, social welfare programmes and on increasing salaries of government servants.

If the projections are met, the gross tax to GDP ratio will go up to around 13 per cent in 2007-08, compared to the Budget estimate of 11.8 per cent and the medium-term target of 12.7 per cent by 2009-10. The Budget had estimated tax revenues for the year at Rs 5,48,122 crore.

So, what now? While industry has already come forward with its wish list of an across-the-board reduction in personal and other taxes, economists advice caution. Says Samiran Chakravarty, Chief Economist, ICICI Bank: “It (the increased collections) will help mitigate the adverse consequences of excess expenditure by the government.

The food, fuel and fertilizer subsidy bills are on the rise. Then, the interest cost for the Market Stabilization Scheme is also expected to rise.” And finally, the Pay Commission report due in April 2008 is expected to significantly inflate the government’s wage bill. “But, the government will be able to fund all its programmes without falling foul of the FRBM Act,” he adds.

— Rishi Joshi