Tax collection may fail to meet target for this fiscal
New Delhi, Nov 24, 2025
Synopsis
The government anticipates a slight dip in tax collections this financial year. This is due to recent Goods and Services Tax rate reductions and global economic challenges affecting corporate profits. However, increased non-tax revenue and savings from flagship schemes are expected to bridge the gap. Officials are assessing the exact shortfall after December 15.
The Centre is bracing for a marginal shortfall in tax collection from the budgeted level in this financial year in the wake of the goods and services tax (GST) rate cuts, income-tax relief and global headwinds weighing down corporate earnings in some sectors, officials said.
However, the government expects higher than anticipated non-tax revenue and savings from expenditure outlays announced under certain flagship schemes to offset any fall in the tax mop-up, enabling it to meet its 2025-26 fiscal deficit target of 4.4% of gross domestic product.
“The exact quantum of the shortfall will be assessed after December 15, after factoring in advance tax trends for the third quarter and analysing the GST collection once the festive boost is over,” said one of the officials, who did not wish to be identified.
Net direct tax collection until November 10 in this fiscal increased almost 7% from a year earlier to Rs 12.92 lakh crore. Refunds fell 18% to about Rs 2.42 lakh crore during this period.
The Centre has budgeted an almost 13% increase in direct tax collection for 2025-26 to Rs 25.2 lakh crore.
Earlier this month, Central Board of Direct Taxes chairman Ravi Agarwal said that the government is confident of meeting the budget targets and that the collection may bounce back by December.
He underscored that actual projections for revised estimates would hinge on the advance tax numbers for the December quarter.
The GST rate cuts on about 99% of items, with effect from September 22, spurred festive buying of a broad range of products, especially automobiles and electronics, raising hopes that elevated consumption would eventually blunt the impact of the indirect tax relief.
However, some experts say while the GST cuts were timed well to boost festive buying, tax collection may soften once the festive season is over. So, the GST mop-up in the final three months of the fiscal may not sustain the December quarter momentum.
GST collection (net of refunds) in this fiscal touched Rs 12.07 lakh crore until October, up 7.1% from a year before but lower than the budgeted 11% growth. Some experts said the sharp fall in inflation had impacted the increase in tax collection.
Retail inflation hit a record low of 0.25% in October and remained below the central bank’s medium-term target of 4% for a fourth straight month.
Customs revenue contracted 5.2% year-on-year in the first half of this fiscal to Rs 1.07 lakh crore, but excise duty collection increased 8.1% to Rs 1.39 lakh crore during this period.
However, non-tax revenue jumped 30.5% to Rs 4.66 lakh crore in the wake of a record Rs 2.69 lakh crore dividend transfer by the central bank. The Centre has budgeted 8.5% increase in non-tax revenue for this fiscal to Rs 5.83 lakh crore.
If the strategic disinvestment of IDBI Bank fructifies in this fiscal, it could fetch the Centre about Rs 30,000-35,000 crore on the part-sale (30.48%) of its stake in the lender. Department of Investment and Public Asset Management secretary Arunish Chawla had earlier said financial bids for the IDBI Bank sell-off could be sought in the December quarter.
[The Economic Times]
