Given the collections to January-end and the historical trend of a quarter of the revenues being collected in the last two months of a fiscal, the Centre's tax revenue — net of mandatory transfers to states — in 2021-22 could exceed the revised estimate (RE) in the recent Budget by up to Rs 80,000 crore or 4.5 percent or 0.3 percent of GDP. This implies that the Centre's budget deficit might be 6.6 percent of GDP, lower than the RE's 6.9%. The estimate is, of course, predicated on the assumption that the REs of other inflows and outflows are accurate.
According to an official source, total tax revenue (GTR) – revenues after refunds but before transfers to states — was at Rs 20.5 lakh crore as of February 2 of this fiscal year.
The slowing rise in excise duty collections as a result of the November rate cuts, as well as the decrease in corporate margins as a result of rising input costs, would have an impact on February-March collections. Despite this, GTR for the current fiscal year is expected to be approximately Rs 26.5 lakh crore, up Rs 1.3 lakh crore from the RE. As a result, net tax receipts might be about Rs 18.5 lakh crore, versus Rs 17.65 lakh crore in the RE.
According to the Finance Commission's methodology, the states and UT of Jammu & Kashmir must receive 42 percent of the divisible pool of taxes. In FY21, however, just 36% of GTR flowed to states, as cess collections, which are not shared with states, rose faster than receipts from divisible pool taxes.
It may be noted at Rs 25.2 lakh crore, the RE of GTR is higher than the Budget estimate (BE) by Rs 3 lakh crore or 13.5%. At Rs 17.65 lakh crore, the RE of net tax receipts is higher than the BE by Rs 2.2 lakh crore or 14%.
The Centre's real tax revenues were also higher than the REs in the previous fiscal year.
According to Aditi Nayar, chief economist at Icra, the Centre's GTR might rise by Rs 50,000-1,00,000 crore over the FY22RE, while net tax revenues could rise by Rs 35,000-70,000 crore during the RE. She stated that the impact of rising commodity prices on corporate profitability could decrease tax receipts in Q4FY22.
By March 15, corporations must pay their final advance tax of 25% of their full-year tax due.
The Centre's tax revenues have been strong this fiscal year, with contributions from all major tax heads, including corporate tax, goods and services tax, customs duty, and personal income tax. The Centre is expected to earn Rs 60,000-80,000 crore in capital gains tax in 2021-22, up from Rs 6,000-8,000 crore in FY21, thanks to a thriving stock market.
“On every count — corporate tax, income tax, TDS, self-assessment, regular tax, securities transaction tax and equalisation levy — this year is better than 2018-19, 2019-20, 2020-21,” Central Board of Direct Taxes chairman JB Mohapatra said recently.
The formalisation of the economy and increased compliance are also driving the increase in tax collection.
In January (December sales), gross GST revenues reached Rs 1.41 lakh crore, the largest mop-up in the history of the comprehensive indirect tax, which was established in July 2017. Despite the fact that e-way bill generation fell by 4% in January compared to December, recent patterns suggest that GST revenues for February (January sales) will be approximately Rs 1.3 lakh crore.
“Given the rising imports, largely stable consumption and push to investments by the government, GST collections will likely continue to be robust,” said India Ratings chief economist DK Pant.