By TV Mohandas Pai & Nisha Holla
Data from the Controller General of Accounts indicate that FY22 tax collections are on track to beat not just the pandemic-struck FY21’s but also FY20’s, a regular growth year. The accompanying graphic shows actual collections data in FY20, FY21 and between April and October in FY22 for the gross tax revenue (GTR) and large tax headings like corporation, income, central goods and services (CGST), GST compensation cess, customs, and excise duties. The estimated FY22 totals are computed by adding the actual April-Oct collections to the actual Nov-Mar collections of FY21. These are conservative estimates since they are based on the pandemic year collections and not the high-velocity growth of FY22.
Actual GTR collections in FY22 is Rs 13.64 lakh crore, compared to Rs 8.76 lakh crore in FY21 and Rs 10.52 lakh crore in FY20 in the same period. A conservative estimate for FY22 totals is Rs 25.1 lakh crore in GTR. This indicates nearly Rs 3 lakh crore over the BE FY22 of Rs 22.2 lakh crore. An analysis of individual tax headings indicates it could be even higher.
Corporation tax (CT): April-Oct FY22 collections is Rs 3.3 lakh crore, a 92% increase over the same last year. Adding to this Rs 2.85 lakh crore estimated from Nov-Mar FY21 shows a conservative estimate of Rs 6.15 lakh crore total in FY22. This is Rs 68,330 crore higher than the budget estimate of Rs 5.47 lakh crore. March collections (see graphic) over four years shows CT March FY21 was the lowest—due to the high volume of refunds processed. If the 92% increase in current CT is applied for March as well, it would be Rs 2.05 lakh crore. If not that much, CT will at least hit the FY19 peak of Rs 1.9 lakh crore, higher by Rs 80,000 crore from the March FY21 CT. Total CT FY22 could be Rs 1.5 lakh crore over the BE of Rs 5.5 lakh crore.
Income tax: Actual I-T tax collections for April-Oct FY22 are Rs 3.11 lakh crore. Estimating total by adding Nov-March FY21 collections of Rs 2.7 lakh crore to this gives us an I-T total Rs 5.77 lakh crore—beating BE by Rs 16,400 crore. The current run rate could generate much higher income taxes.
GST: Per the same conservative analysis, CGST too may increase by Rs 36,000 crore. Collection in the past few months is trending over Rs 1.3 lakh crore. Assuming this run rate holds for Dec-March, Nov-March FY22 will see Rs 6.5 lakh crore. Removing Rs 50,000 crore for compensation cess, the Centre gets 50% of the balance, or Rs 3 lakh crore, beating FY21 collection by Rs 50,000 crore. This number may still be on the lower side since Oct and Nov GST was dampened by the global chip shortage’s impact on the automobile industry. Sales picking up now will mean higher collections.
Customs and excise duties: Actual collections for April-Oct FY22 are Rs 1.12 lakh crore and Rs 2.04 lakh crore, respectively. Analysis as above shows estimated total could be Rs 1.96 lakh crore and Rs 4.33 lakh crore, respectively—Rs 60,000 crore and Rs 1 lakh crore over the BE. But due to the cut in fuel taxes in November, Rs 45,000 crore must be removed from excise duties—now Rs 55,000 crore over the excise duty BE.
GTR thus might beat BE by Rs 4 lakh crore. Of this, 58% of all tax heads (except for 100% for Customs) will supplement the Centre’s net availability, which could be Rs 2.52 lakh crore.
Non-tax revenue (NTR): RBI’s transfer of surpluses has already increased from the budgeted Rs 53,500 crore to Rs 99,100 crore. With an expected increase in dividend flows from oil companies with higher profits, total NTR could exceed BE by Rs 75,000 crore.
Non-debt capital receipts (NDCR): NDCR FY22 is budgeted at Rs 1.88 lakh crore. Even if the disinvestment of either LIC (Rs 1 lakh crore) or BPCL (Rs 75,000 crore) doesn’t take place, the increase in NTR will be adequate to take care of the shortfall.
Of the Rs 4 lakh crore GTR above FY22 BE, Rs 2.52 lakh crore will be available for the Centre’s additional expenditure. Two supplemental demands have already been laid, of which the net additional cash outgo together is estimated at Rs 3.2 lakh crore, including Rs 50,000 crore for food subsidies, Rs 58,430 for fertiliser subsidies, Rs 53,000 crore for pending export incentives, Rs 65,000 crore to Air India, Rs 22,000 crore for MGNREGA, and a comprehensive cleanup of past liabilities.
The government can meet this excess expenditure (Rs 3.2 lakh crore) due to the buoyancy in tax revenues (Rs 2.52 lakh crore), leaving a possible deficit of Rs 70,000 crore. This deficit might be offset by potential last-minute savings or increase in revenues. Studies also indicate that the GDP might reach Rs 228 lakh crore, against the budgeted Rs 222 lakh crore.
FCI’s borrowings from the NSSF were taken over by the Centre in Budget FY21. The excess collection over the RE last year were also used to take over other such liabilities budgeted for FY22. These one-time payments thus showed up in the government budget, leading to an apparent increase in fiscal deficit to 9.2%. As this was a one-time cleanup, FD has since decreased to 6.8% in FY22.
Hopefully, with the current cleanup in FY22, FY23 revenues, bolstered by expected tax buoyancy and a massive reduction in one-time expenditure in FY22, can be utilised for meeting accelerated infrastructure development and current expenditure demands (of FY23) instead of past liabilities.
The unprecedented revenue generation could also allow the government to rearrange the tax slabs and bring some relief to the long-suffering middle class.
Respectively, chairman, Aarin Capital Partners, and technology fellow, C-CAMP