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Why tax collections are likely to exceed Budget estimates

Nov 28, 2022

Budget 2023: The Narendra Modi government's gross tax collections for the financial year 2022-23 are expected to exceed the Budgeted estimates. According to a report in ET, the gross tax revenues may surpass the Budget target of Rs 27.6 lakh crore by at least Rs 3-3.5 lakh crore.

DK Srivastava, Chief Policy Advisor at EY told TOI that the tax collections will be more than the Union Budget estimates because the FY23 India Budget assumed a nominal GDP growth of 11% whereas for this year it will be in the range of 16-17%. "Even if one were to assume the current buoyancy to continue, the tax collections will exceed the estimates. Going ahead we expect the tax collections to continue being robust in the next fiscal as well," Srivastava said. "Given the inflationary pressures are likely to continue, the Union Budget 2023 should make a more realistic estimate, which we expect will definitely be met," he added.
As per the data for the first half of this fiscal, the gross taxes collection stands at 50.5% of the budgeted estimates.

According to Srivastava of EY, within the tax collections, the growth is mainly coming from direct tax collections which are growing at 23.5%. Indirect tax collections are growing at around 11.8% in the first half of FY23.
A Ministry of Finance release in October states that direct tax collections up to 8th October, 2022 show that gross collections are at Rs 8.98 lakh crore. This is 23.8% higher than the gross collections for the corresponding period of last year.

Direct Tax collection, net of refunds, stands at Rs. 7.45 lakh crore which is 16.3% higher than the net collections for the corresponding period of last year. This collection is 52.46% of the total Budget Estimates of Direct Taxes for FY23.

The growth rate for Corporate Income Tax is 16.73% and Personal Income Tax for 32.30% in terms of gross revenue collections. After adjustment of refunds, the net growth in corporate collections is 16.29% and that in personal collections is 17.35%.

GST collections have grown at a healthy 33.4% in the first half of this fiscal over the corresponding period last year. "The growth in GST collections is because of two factors, one the tax rates have been revised upwards for certain commodities and two because GST is an ad valorem tax, hence as long as the nominal cost of goods is high, the tax collections will also be high," Srivastava explains.

[The Times of India]