NEW DELHI: Government’s tax revenues fell sharply in the April-June quarter, underscoring the toll Covid-19 lockdown took on the economy, forcing the government to borrow record amounts to meet its spending, data released on Friday showed.

Gross tax revenue declined 32.6% in the first quarter of the year from the corresponding year ago period with the centre’s goods and services tax (GST) taking the maximum 47% knock, suggesting extreme consumer distress or caution.

The extra borrowing to meet the revenue shortfall pushed up the fiscal deficit at the end of June to Rs 6.62 lakh crore, 83.2% of the full year budget estimate or Rs 7.96 lakh crore.

This is highest fiscal deficit in percentage terms for the first quarter going back to available data since FY1999-2000.

The contraction in gross tax revenue narrowed to 23% in June, suggesting some pick up in the economy after the restrictions were eased beginning June 1. Central GST decline for June was 14.8%.

The government has already raised its borrowing target for the year to Rs 12 lakh crore, implying a high breach of the target set in the budget.

“The Government of India’s fiscal deficit has expanded by a sharp 53.3% on a YoY basis in Q1 FY2021, and now stands at 83% of the budget estimate for this fiscal, reinforcing the challenges posed by the ongoing crisis to fiscal management,” said Aditi Nayar, principal economist, ICRA, a ratings agency.

Corporate tax collection was down 23.2% in the quarter from a year ago while income tax collections declined 36%, corroborating the loss jobs and lower incomes. There is marginal improvement in June with collections lower by 27%.

“The pace of contraction in the gross tax revenues has narrowed to 23% in the month of June 2020 from the dismaying level of 41% seen at the end of the previous month, in line with our assessment of some recovery in economic activity during the unlock phase,” Nayar said.

Total government expenditure in the first quarter was in line with the trend at 26.8% of budget estimate for FY21 against 25.9% same period last year. This suggests there is no sharp rise in government spending as of now to counter the impact of Covid-19 and the fiscal stress is largely because of the lower revenues.

Revenue deficit was 94.8% of the full year budget estimates at the end of the quarter against 77% for corresponding period last year.

Capital spending was higher at 21.4% of budget estimate compared with 18.6% last year. Disinvestment has not yielded anything so far.