scorecardresearch

Direct tax mop-up may beat budget estimate by 30%

The Centre’s goods and services tax (C-GST) collections may exceed the target by Rs 1 trillion, while the customs duty targets will be met, he added.

Direct tax mop-up may beat budget estimate by 30%
“Direct tax collections are up 23% on year so far this fiscal. However, the growth for the the whole of the year may be close to 30%, as refunds will likely slow down in the second half of the year,” the official said.

The Centre’s direct tax revenues may rise 25-30% on year, allowing it to net an additional Rs 2.5 trillion over the budget estimate (BE) after the mandatory devolution to states, a senior finance ministry official told FE. The extra receipts would give a cushion to the government, which is looking at an additional subsidy expenditure of Rs 2.8 trillion over the budgeted level, the official said.

He added that the indirect tax collections will also see a marginal increase over the BE, despite the excise duty cuts on petrol and diesel announced in May.

“Direct tax collections are up 23% on year so far this fiscal. However, the growth for the the whole of the year may be close to 30%, as refunds will likely slow down in the second half of the year,” the official said.

Direct tax refunds rose 81% on year to Rs 1.53 trillion till October 8 of the current fiscal.

Elevated global prices of hydrocarbons and the free ration scheme have put additional spending obligations on the Centre. The free ration scheme will cost Rs 1.24 trillion in April-December of FY23 and the fertiliser subsidy bill is seen to be Rs 1.15-1.3 trillion more than the BE of Rs 1.05 trillion. Besides, a “one-time grant” of Rs 22,000 crore was allocated to state-run oil marketing companies to cover their under-recoveries on the sales of domestic LPG.

Also Read: India’s forex buffers sufficient, limited risks to sovereign rating from external pressures: Fitch

Despite the excise duty on petrol and diesel in May that may lead to a revenue loss of Rs 60,000-70,000 crore in FY23, the official said indirect tax receipts may be a little higher than the Rs 13.3 trillion budgeted.

The Centre’s goods and services tax (C-GST) collections may exceed the target by Rs 1 trillion, while the customs duty targets will be met, he added.

The Centre’s gross direct tax collections for FY23BE is Rs 14.2 trillion (almost the same as was the actual collection in FY22), but the collections are likely to be about Rs 3.8 trillion more than the BE. Direct tax receipts grew by 49% on year in FY22. Over a two-year period since FY21, the collections will see a growth of over 90%, the official noted.

Of course, the persistently high inflation is one reason behind the sharp increase in tax collections , as it helped boost corporate earnings.

Meanwhile, the income tax department is going after tax evaders by sending nears 50,000 notices to people, including online gaming participants who made huge gains, the official said. About 300,000 updated income tax returns (ITR-U) have been filed by these people and they have already coughed up `200 crore so far and more are expected in the coming months.

The department has detected that players made wins to the tune of `58,000 crore in one Mumbai-based gaming portal but have not paid any taxes. Similarly, the indirect tax department has served a Rs 21,000-crore GST notice to Bengaluru-based online gaming company Gameskraft Technology (GTPL) for not collecting taxes. The income tax department is also probing Gameskraft for not deducting TDS.

Even though the growth rate may moderate in the second half of FY23, the monthly GST collections may average about Rs 1.53 trillion in FY23, which analysts say could fetch the Centre an extra Rs 1.5 trillion (before devolution).

The Centre’s gross tax revenue (GTR) may be around Rs 31.5 trillion in FY23, Rs 3.9 trillion or 14% more than the BE of Rs 27.6 trillion.
The net (post-devolution) tax revenue for the Centre could be around Rs 2.5 trillion higher than the BE of Rs 19.3 trillion.

However, non-tax revenues may see some shortfall in FY23 as the dividend receipts from the RBI may have been `25,000-30,000 crore less than assumed in the Budget and some shortfall is seen in disinvestment revenue receipts target of Rs 65,000 crore for the year.

Besides additional tax revenues, the government is banking on revenue expenditure rationalisation to keep the fiscal deficit within 6.4% of GDP for FY23.
The comfort from tax revenues led the Centre to trim its gross market borrowing target for the second half of this fiscal by Rs 10,000 crore.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 22-10-2022 at 06:15 IST