Indirect tax receipts up 51% on year in April-October

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November 11, 2021 3:00 AM

The Centre’s net tax collections (pre-excise duty cuts on petrol and diesel) could exceed budget target by about Rs 2 lakh crore in FY22, largely covering the additional fiscal cost of stimulus measures announced by the government so far.

Gross GST collections (for Centre and states combined) came in at Rs 1,30,127 crore in October (September sales), the second highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.Gross GST collections (for Centre and states combined) came in at Rs 1,30,127 crore in October (September sales), the second highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017.

Despite the fizzling out of a favourable base effect, indirect tax collections have seen robust growth till October of this fiscal. In the first seven months of FY22, gross indirect tax collections (net of refunds, but before devolution to states) grew 51% on year to about Rs 7.4 lakh crore, as against a required rate of 3% to achieve the full year target of Rs 11.09 lakh crore. The collections in April-October 2021 were also 41% higher than the receipts in the corresponding period of FY20.

Even monthly indirect tax collection numbers have shown a steady growth on year. These collections grew 25% on year in July, 17% in August, 34% in September and a 63% in October. However, it may be noted that October GST collections largely belong to the transactions in the previous month.

Besides steady goods and service tax (GST) collections, customs duty and excise duty collections have been very robust. In the Centre’s monthly indirectly tax collections, GST constitutes 40-50% depending on apportionment of integrated GST collections (IGST) between the Centre and states. Monthly customs duty collections in FY22 have been more than double compared with the corresponding months till October (except in April when it was more than four times of the receipts in the year ago month).

“Besides anti-evasion measures, field officers are holding regular meetings with industry representatives in their zones to ensure that taxes are paid in time,” a senior official told FE.

In H1FY22, the Centre’s gross excise duties receipts grew 33% on year to Rs 1.72 lakh crore against the Budget estimate of 14% decline on year to reach Rs 3.35 lakh crore target set for the full year. On Last Thursday, the Centre reduced excise duty on petrol and diesel by Rs 5 per litre and Rs 10 per litre, respectively. The duty cut could result in Rs 65,000 crore revenue loss in November-March of the current fiscal year due. The tax collections will get affected, but we could still meet the excise duty revenue target for the current financial year, officials reckon.

Gross GST collections (for Centre and states combined) came in at Rs 1,30,127 crore in October (September sales), the second highest mop-up in the history of the comprehensive indirect tax that was launched in July 2017. This, coupled with a sustained trend of rise in the number of e-way bills (inter-state trade) and GST returns for several weeks through October, bears testimony to a rise in consumption and a marked increase in tax compliance, though partly at the cost of the businesses in the informal sector, a section of which has perished.

Gross direct tax collections (net of refunds, but before devolution to states) also grew an impressive 70% on year in April-October of the current financial year to Rs 6.45 lakh crore, according to data gathered by FE. However, the growth rate has been slowing over months. The collections grew 103% on year in July, 66% in August, 59% in September, but saw a decline of 21% in October, reflecting the fizzling out of the low base effect. Tax collections had improved in the year-ago period, after Covid-induced lockdown was lifted.

The Centre’s net tax collections (pre-excise duty cuts on petrol and diesel) could exceed budget target by about Rs 2 lakh crore in FY22, largely covering the additional fiscal cost of stimulus measures announced by the government so far.

Analysts are of view that since tax collections have been buoyant so far in FY22, the excise duty reduction will unlikely alter FY22’s fiscal arithmetic. The Centre’s fiscal deficit will likely come within the budget target of 6.8%.

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