Govt may close FY23 with Rs 50,000 cr shortfall in direct tax mop up

The government is expected to have closed the financial year 2022-23 (FY23) with a Rs 50,000-crore shortfall in the direct tax collection. The mop-up until March 30 stood at Rs 15.97 trillion against the revised target of Rs 16.5 trillion.

Tax officials also expect a deficit in the overall indirect tax mop-up, mainly dampened by the customs and excise collections.

The Revised Estimate (RE) for the outgoing financial year pegged the overall tax revenue at Rs 30.43 trillion, higher than the Budget Estimate (BE) of Rs 27.57 trillion.  The revenue from direct taxes (which include income and corporate taxes) was projected to grow by over 17 per cent to Rs 16.5 trillion, from Rs 14.20 trillion in FY22.

As on March 30, on a net basis, direct taxes grew 15.6 per cent to about Rs 15.7 trillion. The corporate tax collection stood at approximately Rs 8.18 trillion and personal income tax mop-up came at Rs 7.52 trillion. The revised targets were Rs 8.35 trillion and Rs 8.15 trillion, respectively.

Officials attributed the shortfall in direct taxes to slower-than-estimated growth in advance tax receipts from top companies and individuals in the March quarter. On the indirect tax front, the overall GST collection may see double-digit year-on-year growth; it had already touched Rs 16.46 trillion for the April 2022- February 2023 period.

“The March data would give a clearer picture, but going by the trend, inventory clearances by companies boost shipment in March, which may reflect in the upcoming collections,” a government official said.      

The RE for the central GST (CGST) collection was revised upwards to Rs 8.54 trillion in FY23, against BE of Rs 7.8 trillion.

The CGST collection between April and February stood at nearly Rs 6.58 trillion, according to the CGA (the Controller General of Accounts) data released on Friday.

Other key components -- customs and excise -- under indirect taxes may see a contraction in the year ended March 31, 2023. As of February, the collection from customs stood at around Rs 1.89 trillion, against the RE of Rs 2.10 trillion. The excise collection was approximately Rs 2.70 trillion, against the RE of Rs 3.2 trillion, the CGA data showed.

The March data will come in FY24.

“Growth in gross tax revenue slowed to 4.5 per cent in February 2023, dampened by the corporation tax and excise duty mop-up. Gross tax revenue needs to grow 14 per cent on a YoY basis in March 2023 to meet the FY23 RE; this includes a 32 per cent expansion in corporation tax, which seems somewhat optimistic,” according to Aditi Nayar, chief economist, ICRA.

Other than these, the government’s capital receipts, especially disinvestment receipts, reported a shortfall of Rs 14,707 crore. The government disinvestment kitty as on March 31 stood at Rs 35,293 crore, against the Rs 50,000 crore RE.

The dividend from public sector enterprises gave some breather: It stood at Rs 58,988 crore, compared to the revised target of Rs 43,000 crore.

The RE for disinvestment and dividend proceeds for FY23 was Rs 93,000 crore, of which the government has realised Rs 94,281 crore as disinvestment and dividend proceeds from CPSEs as on Friday, another official said.

Notably, the government had pinned hopes on Hindustan Zinc’s (HZL’s) partial share sale by March-end to shore up its divestment mop-up. But it was deferred due to a proposed deal by Vedanta.