GST collections in September were expected to be low due to the cut in GST rates that were made effective from July 27.

GST collections rose marginally to Rs 94,442 crore in September, but with average collections in the first six months of the year at around Rs 96,283 crore compared to the Rs 1,12,316-crore budgeted for FY19, the government could be looking at a GST shortfall of at least around Rs 1 lakh crore for the year. GST collections rose 0.8% compared to August 2018 and 4.2% as compared to September last year.

GST collections in September were expected to be low due to the cut in GST rates that were made effective from July 27. How much tax collections will rise in the rest of the year is not clear; in the pre-GST days, 60% of indirect taxes were collected in the second half of the year, but that same relationship may not hold as, under the GST regime, taxes for each month are collected immediately.

Also, at 65 lakh, the number of filers has been stable at this level for a few months. While detailed invoice-level filing, vital for invoice-matching, was abandoned in favour of a system where invoice-matching would be part of the business process, this is not going to be implemented till after the elections.

How large the budgetary shortfall is likely to be will then depend upon how much extra the government is able to mop up from other sources. “The government would be able to make up part of the GST revenue collection deficit from the buoyant direct tax collection as well as from divestment proceeds but this would still not be enough to achieve the total tax collection target,” a senior finance ministry official said. As compared to the budget target of a 14.4% growth in direct taxes, collections grew by 16.1% in April-August FY19.

The government is also likely to face a Rs 20,000-crore shortfall in telecom revenues, budgeted at Rs 48,700 crore. While the government collected Rs 30,000 crore in FY18, this could fall further in FY19 as, thanks to RJio’s pricing, industry revenues — and the share going to government as licence fees — have collapsed even more.

A lot depends on how disinvestment revenues fare compared to the target of Rs 80,000 crore; in FY18, the government collected `1 lakh crore versus the target of Rs 72,500 crore. The government can get about Rs 35,000 crore by selling bulk of its residual stake held via SUUTI in ITC (7.95%) and Axis Bank (9.63%). How much can be sold, of course, depends upon the state of the stock markets that have fallen 5.4% in just September.

In all likelihood, the government will have to resort to another ONGC-HPCL type of big deal with one PSU taking over another. NTPC buying over NHPC (government stake is worth Rs 17,565 crore) and REC buying PFC (government stake worth Rs 13,718 crore) while IOC/BPCL buying GAIL (bulk of Rs 45,967 crore as pipeline business will be hived off before such a sale) is another possible option.

While finance minister Arun Jaitley has said the government will not breach its deficit target or compress spending, another possibility is to defer payments on subsidies to FY20 or to resort to more extra-budgetary borrowings (EBRs) via PSUs. The Centre has lined up plans to raise a massive Rs 1.7 lakh crore via the EBRs in the current fiscal, up 110% from FY18.