Despite the excise duty cut on petrol and diesel, the Centre’s indirect tax collections grew by a robust 14% on year in April-August of the current financial year as against a required rate of 3.5% to achieve the full-year target. The higher mop-up was largely aided by robust goods and services taxes (GST) receipts.
The growth rate indicates that indirect tax collections by the Centre would exceed the FY23 target of Rs 13.38 trillion by a substantial margin, giving a much-needed comfort to the government looking for additional revenues to keep the budget deficit within the target of 6.4% of GDP.
“Till August, CGST is doing well with a growth of about 35% while excise duty receipts were affected by the duty cuts in May. Customs duty collections are influenced by seasonal factors,” a senior official told FE.
Going by the current trend in GST receipts, the Centre’s gross GST receipts might be about Rs 1.4 trillion more than BEFY23. The Centre’s net extra tax revenue from GST receipts may be about Rs 80,000 crore in FY23 after factoring in 41% devolution to states.
Indirect tax collections had grown by about 20% on year to about Rs 12.93 trillion in FY22, aided partly by tax buoyancy, despite an excise cut in petrol and diesel in November 2021. The excise duty on auto fuels was cut again in May this year which could result in a loss of revenue of about Rs 85,000 crore in FY23.
The official said the indirect tax collections growth may be even higher than 14% on year in FY23 as against an asking rate of 3.5% as the tax collections tend to pick up in the second half of a year. The central board of excise and customs was also making an effort for faster clearance of goods by customs authorities that would help in augmenting tax revenues.
On the GST front, revenue secretary Tarun Bajaj on Wednesday had nudged the indirect tax officers to garner about Rs 1.5 trillion in GST from October (that will be released on November 1) onward by ensuring better compliance and plugging leakages. The average monthly gross GST collections for the first five months of the current fiscal have been over Rs 1.49 trillion as against an average of `1.23 trillion for the full FY22.
The Centre’s direct tax collections grew by a robust 30% on year till September 8 of the current financial year. The direct tax collections are expected to exceed the FY23 Budget target of Rs 14.2 trillion by a substantial amount, as the target for the year is at par with actual receipts of last fiscal.
Higher GST collections and direct tax receipts could ease pressure on the Centre’s finances given likely increase in subsidies burden in excess of Rs 2 trillion over the FY23 budget estimate on food, fertilizer and LPG.