Union Budget 2024-25: Govt likely to increase tax mopup estimates

Projections may increase by Rs 30K-40K cr vs Interim Budget

The Union government is likely to increase its tax revenue projections for 2024-25 by Rs 30,000-40,000 crore in the forthcoming Budget, according to two officials in the know. This change is anticipated due to higher economic growth projections compared to those in the Interim Budget, alongside enhanced tax buoyancy, primarily driven by direct taxes and the central goods and services tax (CGST).

“We could expect a revision of Rs 15,000-20,000 crore each in direct and indirect taxes in the Budget, in line with higher GDP growth projections and the current robust trend in tax collection,” said one of the officials.

For FY25, gross tax revenue was projected at Rs 38.3 trillion in the Interim Budget, reflecting a 10.7 per cent increase from the Rs 34.6 trillion provisioned for FY24.

North Block expects to raise Rs 21.99 trillion from direct taxes and Rs 16.31 trillion from indirect taxes in the ongoing financial year.

In FY25, so far, the net direct tax collection has increased 19.54 per cent to over Rs 5.74 trillion, largely driven by higher advance tax payments from corporations. The first advance tax instalment, due on June 15, rose 27.34 per cent to Rs 1.48 trillion, comprising Rs 1.14 trillion from corporate income tax (CIT) and Rs 34,470 crore from personal income tax (PIT).

Gross collection (before refunds) until July 11 this year stood at Rs 6.45 trillion, with personal income tax contributing Rs 3.61 trillion and corporate tax accounting for Rs 2.65 trillion.

On the indirect tax front, the government, as outlined in the Interim Budget, targets to raise Rs 10.67 trillion from GST in FY25, compared to Rs 9.57 trillion in FY24.

Other key indirect tax receipts include excise duty, budgeted at Rs 3.23 trillion for FY25, up from a downwardly revised Rs 3.08 trillion for FY24. The Customs collection for FY25 is pegged at Rs 2.31 trillion. 

The officials indicated that monthly gross GST collections are expected to continue their upward trend, likely remaining above the Rs 1.6 trillion mark in the current financial year. The gross GST collection set a new record of Rs 2.1 trillion in April 2024, underscoring the economy’s resilience. The collections for May and June were Rs 1.73 trillion and Rs 1.74 trillion, respectively, indicating the stability of the indirect tax regime introduced seven years ago.

An email sent to finance ministry remained unanswered.

Revenue from GST is projected to grow 10-11 per cent in FY25, officials noted, adding that robust figures would help the government adhere to its fiscal glide path.

The central government, in the Interim Budget, budgeted a fiscal deficit of 5.1 per cent of GDP for FY25, with a goal to reduce it to 4.5 per cent by FY26.

Economists assert that strong momentum in the economy will ensure robust performance on both direct tax and GST fronts, allowing the government to focus on its capital expenditure plans and potentially expand its welfare schemes.

“With the economy cruising along at 7-7.5 per cent growth this year, there is inherent buoyancy to generate higher tax revenue. The Interim Budget assumed 10.5 per cent nominal GDP growth, which could increase by one percentage point. Even a modest recovery in consumption will generate more GST. Therefore, an upward revision can’t be ruled out,” said Madan Sabnavis, chief economist at Bank of Baroda.

With the Bharatiya Janata Party’s allies playing a crucial role in the stability of the current National Democratic Alliance government, the upcoming full Budget is likely to strike a balance between the demands of coalition partners and growth targets, in order to promote development and ensure economic stability.