Tax mop-up may top target by ~2.5 trillion

Monthly GST collection likely to touch ~1.5 trillion next fiscal year

The central government is likely to exceed the budgeted tax collection target of ~22.2 trillion for the current fiscal year, led by better indirect tax mop-up, compliance measures, and recovery in most sectors following the second wave of the Covid pandemic. It, according to experts, may overshoot the target by ~2.5 trillion.

Personal income and corporate tax collections (net of refunds) grew 74 per cent to ~5.70 trillion in the first half of the current financial year, driven mainly by advance tax and TDS payments. The target for the current fiscal year is ~11.08 trillion; higher taxes are paid usually towards the end of a fiscal year.

The goods and services tax (GST) mop-up is expected to remain above the ~1.1 trillion-mark a month as the festive season is set to see an improvement in consumer spending. Besides, a sharp increase in duty on petrol and diesel continued to keep excise revenue on an upswing.

“The numbers are expected to see a further surge in the upcoming quarters as companies are expected to pay more taxes in the third and fourth quarters," said a senior government official.

According to him, companies, so far, have paid taxes cautiously amid uncertainties around the third Covid wave, but since vaccination is proceeding rapidly and is set to cover the entire adult population by December, the impact wouldn’t be as severe as the second wave.

But, the monthly GST collection is expected to touch the ~1.5-trillion mark, on a regular basis, only in the next fiscal year, he added.

The Budget 2021-22 had set a tax revenue target of ~22.17 trillion for FY22. After devolution to states, the Centre's net tax revenue for FY22 was pegged at ~15.45 trillion. The GST revenue, including the Central GST and compensation cess, was pegged at ~6.30 trillion for the current FY.

Economists, too, see tax revenue overshooting the BE for FY22. Soumya Kanti Ghosh, group chief economic adviser, State Bank of India, said: “According to our estimates, the revenue collection for the fiscal year would surpass the FY22 budgetary target by up to ~2.5 trillion, taking total collection to over ~24 trillion. This is mainly due to tax buoyancy in both direct and indirect tax collections.”

The direct tax collection of ~5.7 trillion includes corporation tax of ~3.03 trillion and personal income tax, including security transaction tax (STT), of ~2.67 trillion. The Centre projected corporation tax to stand at ~5.47 trillion and personal income tax at ~5.61 trillion in BE for the current fiscal year.

The gross collection of direct taxes, before adjusting for refunds, grew 47 per cent to ~6.46 trillion during the first half of the current year vs ~4.39 trillion during the same period last FY, the government data showed.

The gross collection rose 16.75 per cent during April-september 2021 over FY20 when it was ~5.53 trillion.

Among indirect taxes, the average monthly gross GST collection, including Central GST, State GST, and compensation cess, for the second quarter this year was ~1.15 trillion, which was 5 per cent higher than ~1.10 trillion in the first quarter.

GST collection exceeded ~1.1 trillion for the third month in a row in September when it grew 4 per cent YOY to ~1.17 trillion. In August, it grew by 30 per cent YOY to ~1.12 trillion, and in July by 33 per cent to ~1.16 trillion.

Besides economic recovery, measures against antievasion activities, especially action against fake billers, have been contributing to enhanced GST collection.

Meanwhile, the central excise duty collection has already touched ~ 1.37 trillion (until August) in FY22 – growth of 37 per cent over ~ 1 trillion collected by the Centre in the first five months of FY21 through excise duty.

The Centre in April 2020 had raised the excise duty on petrol from ~19.98 a litre to ~32.9 and on diesel to ~31.8 from ~15.83 a litre to compensate for the fall in the international oil prices at that time.