The Centre’s gross tax collections (post refunds but before transfers to states), stood at Rs 4.6 trillion in the first two-months of the current financial year, 15.9% higher than the year year-ago level, data released by the Controller General of Accounts (CGA) showed on Friday. This is against 10.6% annual growth pegged in the Budget for FY25.
Net tax revenue (after refunds, and after devolution to states) during April-May, stood at Rs 3.19 trillion, accounting for 12% of the Budget estimate of Rs 26.02 trillion. However, during the same period of FY24, net tax revenue had accounted for about 16% of the Budget target.
The sharp growth in gross collections during April-May FY25 was primarily driven by a massive 41.7% growth recorded in personal income tax (PIT) collections, which stood at Rs 1.8 trillion. The interim Budget, however, presented in February, had pegged the PIT growth during FY25 at only 14.3%.
Experts say the sharp rise in collections during April-May reflects a trend visible during FY24 as well. This shows a widening of the tax base, as the use of technology, rationalisation, simplification of taxes and procedures, and improved tax payer services, have led to higher tax compliance.
Corporate tax collections, meanwhile, came in at Rs 45,313 crore, down 21.1% on year. This is lower than the Budgeted growth of 14.5%. Experts say, a decline in collections could be attributed to large refunds that corporates might have claimed during April-May.
Rahul Charkha, Partner at Economic Laws Practice notes that the ratio between corporate tax and personal income tax has been reducing substantially since FY 2019-20 and from FY 2022-23, personal income tax has surpassed the contribution to total tax collection. “The sharp fall in corporate tax after FY 2019-20 can be attributed to the deep corporate tax cuts introduced by the ruling government in September 2019,” he said.
The Central GST collections rose 12% on year to Rs 1.59 trillion during April-May, and customs mop-up increased 3.7% to Rs 28,090 crore. Excise duty mop-up, on the other hand, stood at Rs 24,317 crore, which was down 7.7% on year.
The-higher-than Budgeted gross tax revenue shall help the Centre achieve its fiscal deficit target of 5.1%, as a ratio of GDP, in the current financial year. A much higher than anticipated surplus of Rs 2.11 trillion from the RBI, is anyway going to provide cushion to any fiscal slippage.
In April-May, non tax revenue stood at Rs 2.52 trillion, accounting for 63% of the Budget estimate. In the same period of FY24, the collections accounted for 45% of the Centre’s aim.
“The revenue upside seen from non-tax, and to a smaller extent, tax receipts suggests headroom to both boost expenditure and target a faster fiscal consolidation than what was pencilled in to the Interim Budget for FY25,” said Aditi Nayar, chief economist, ICRA.