The Economic Survey 2021-22 on Monday said a strong revival in revenues and the agile fiscal policy approach adopted by the government have created headroom for additional fiscal support, if needed.
The Survey, which is tabled in Parliament a day before the Union Budget, also noted that gross tax revenue during April-November 2021 has grown by 50 per cent year-on-year, while the GST mop up remained above Rs 1 lakh crore mark since July 2021.
“…the agile fiscal policy approach adopted by the government, coupled with the buoyant revenue collection received so far this year, has created headroom for taking up additional fiscal policy interventions based on the need of the evolving situation,” the Survey said.
Recalling that the fiscal support given to the economy as well as the health response caused the fiscal deficit and government debt to rise in 2020-21, the Survey said so far in 2021-22 there has been a strong rebound in government revenues.
The revenue receipts of the central government during April-November 2021 have gone up by 67.2 per cent (YoY), as against an estimated growth of 9.6 per cent in the 2021-22 Budget Estimates.
The tax collections have been buoyant for both direct and indirect taxes and the impact of Covid second wave on GST collections was much more muted as compared to the first wave.
It said the buoyant direct and indirect tax mop up, along with the non-tax revenue boosted by RBI’s surplus transfer to the government, have contributed to the increase in the revenue pool.
The gross tax revenue during April-November 2021 has registered a growth of over 50 per cent in YoY terms. This performance is strong not only over the corresponding period of the previous year but also when compared to the pre-pandemic levels of 2019-20.
The corporate tax collections have been buoyant, registering a 90 per cent growth during April-November 2021 over the year-ago period.
It said the ongoing improvement in revenue performance during the current year can also be attributed to increased tax compliance enabled by various tax administration and policy reforms implemented by the government in the past few years.
The revenue collection from customs during April to November 2021 has registered a growth of almost 100 per cent, while the revenue from excise duties have grown 23.2 per cent year on year.
The non-tax revenue collections up to November 2021 registered an YoY increase of 79.5 per cent. This increase was driven by dividends and profits, which stood at Rs 1.28 lakh crore against BE of Rs 1.04 lakh crore.
The key component of dividends and profits during this period was Rs 99,000 crore surplus transfer from RBI to the central government.
“The strong revival in revenues also provides government with fiscal space to provide additional support as well, if necessary,” the Survey said.
With the revival of the economy, the Goods and Services Tax (GST) has emerged as a buoyant source of revenue for both the Centre and the States. The GST collections for the Centre were 61.4 per cent of BE during April to November 2021.
Gross GST collections, Centre and States taken together, were Rs 10.74 lakh crore during April to December 2021, which is an increase of 61.5 per cent over April to December 2020 and 33.7 per cent over April to December 2019.
The Survey, which projected economic growth of 8-8.5 per cent for next fiscal beginning April 1, also said that as the economy grows further, the revenue collection from all the sources is expected to be more robust which will help strengthen the fiscal position on one hand, and create fiscal space on the other.
“Thus, it is expected that reaching the budget estimate for fiscal deficit during 2021-22 will not be a concern for the Central Government. A robust economic growth path and various tax policy and administration reforms undertaken over the last few years will be fundamental in sustaining the buoyant revenues in the medium term, and thus, be on track with the fiscal path outlined by the Medium-Term Fiscal Policy Statement,” the Survey said.
The government has budgeted fiscal deficit at 6.8 per cent of GDP in current fiscal ending March 2022.
The indirect tax receipts have registered a YoY growth of 38.6 per cent in the April-November period. The rise in imports of goods and services ensued due to the recovery in both manufacturing sector and consumption demand, have led to a rise in customs collection.
In continuation with the Government’s emphasis on providing a more transparent, efficient and tax-payer friendly tax administration and improving taxpayer convenience, several initiatives have been launched by the Government. These will also ensure promotion of investment and employment generation.
The income tax department has also taken various measures for ease of compliance for taxpayers, brought in faceless procedures to promote transparency, reduced compliance requirements, besides undertaking various measures to curb tax evasion and promote the widening of tax-base.