4 Tax collections have been impressive, but moderation in inflation, growth might slow it
While inflation has been a major worry for policy makers, one area where is has actually helped is in tax collection. Because taxes are a fraction of nominal incomes, inflation-aided higher nominal GDP growth has given a boost to the union government’s tax collection so far. Data from the Controller General of Accounts (CGA) shows that the union government’s Gross Tax Revenue in the current fiscal year until October has grown by 18% compared to the previous year. Corporation tax collections, which are levied on profits, have shown an even higher growth of 24% in this period.
This rally might not continue in the rest of the fiscal year as both inflation and growth show signs of moderation. To be sure, the government is likely to exceed its budget estimate of Gross Tax Revenue which will be a much needed cushion given the additional spending commitments on account of spending on the Pradhan Mantri Garib Kalyan Yojna and fertilizer subsidy.