Direct tax mop-up beats the revised estimates at Rs 13.6 trillion

Up more than Rs 1 trn over RE for FY22, to help govt rein in fiscal deficit at 6.9%

The government has collected from direct taxes over Rs 1 trillion more than what had been projected in the Revised Estimates for 2021-22 even as about a fortnight is left for the fiscal year to be over.

This collection, a sign of economic recovery and better tax administration, will give the government some buffer in the face of rising expenditure due to the Russia-Ukraine war and an expected shortfall in disinvestment receipts.

The government collected about Rs 13.6 trillion from direct taxes after paying refunds till March 16 against Rs 12.50 trillion projected in the RE. It paid Rs 1.87 trillion as refund.

Direct tax receipts were 48.41 per cent higher than the Rs 9.18 trillion mopped up in the corresponding period of the previous fiscal year. These grew by 42.50 per cent over the Rs 9.56 trillion collected during the corresponding period of 2019-20, which was before the pandemic.

However, if one compares these figures with Rs 10.09 trillion during the corresponding period of 2018-19, growth would be 34.96 per cent. From advance tax came Rs 6.63 trillion, which represented a growth rate of about 40.75 per cent over the corresponding period of the previous fiscal year.

Collection comprised Rs 7.19 trillion from corporation tax and Rs 6.40 trillion from personal income tax. This means the government has collected about Rs 84,000 crore more from corporation tax than the Rs 6.35 trillion pegged in the RE for 2021-22.

It mopped up around Rs 25,000 crore more from personal income tax than the Rs 6.15 trillion projected in the RE.

It should be noted that much of the collection from personal income tax comes by late March. As such, the direct tax kitty may get a further boost, which would help the government rein in its deficit at 6.9 per cent of GDP despite dwindling disinvestment receipts due to putting off the initial public offering of the Life Insurance Corporation to the next fiscal year and rising expenditure.

Of the Rs 78,000 crore budgeted from disinvestment in the RE, only Rs 12,424 crore has been realised. The RE itself was lowered from the BE of Rs 1.75 trillion. Also the government will spend a bit more than Rs 1 trillion over the RE due to a bigger fertiliser subsidy bill.

"We had expected direct tax collection to exceed the RE by about Rs 50,000 crore. The numbers released on Thursday are higher than that. This will help absorb the third supplementary demand in terms of higher expenditure,” ICRA Chief Economist Aditi Nayar said.

It should be noted here that 41 per cent of this revenue (excluding cess) will go to the state’s exchequer. 

As such, the government will need robust goods and services tax (GST) collection in March to supplement the direct tax mop-up and help the government rein its deficit at the budgeted level. The government would also surpass GST collection pegged in the RE. Both the Centre and the states have collected Rs 13.41 trillion by February.