Advance tax paid by companies in the first quarter of the fiscal year grew 46 per cent over that in the equivalent period in 2021-22, indicating healthy tax buoyancy that will provide the government the cushion to absorb part of the higher subsidy bill.
At Rs 42,679 crore, advance tax collection, corporation and personal, rose 48 per cent in the first quarter this fiscal year. Corporation advance tax in Q1 stood at Rs 26,798.6 crore against Rs 18,357.5 crore in the same period a year ago.
Advance personal income tax collection was 52.4 per cent higher in Q1 at Rs 15,881 crore against Rs 10,422 crore last year. These are initial figures reported between April 1 and June 15 (the deadline for the first instalment of advance tax) and they are likely to be revised.
“The figures are expected to be revised as information is awaited from banks,” a government source told Business Standard.
The final numbers will come on June 17-18. During the period, direct tax collection, net of refunds, stood at Rs 2.81 trillion against Rs 1.85 trillion a year ago.
The target for direct tax collection for FY23 is Rs 14.20 trillion. As on June 15, the Centre’s gross collection stood at Rs 3.10 trillion, according to sources. The economy had started to recover from the impact of the pandemic last fiscal year but was hit again by a second wave in April-May and a third assault of Covid-19 in December-January.
However, government is dealing with global macroeconomic challenges of managing sustainable growth, inflation, and keeping the fiscal deficit in check, and ensuring that the external value of rupee remains stable.
To rein in inflation, the government had last month cut excise duties on petrol and diesel and exempted Custom duties on certain items.
Tax collection, direct and indirect, had been projected at Rs 27.58 trillion in the Budget Estimates (BE) in FY23. That represents 9.6 per cent growth over the Rs 25.16 trillion estimated in the Revised Estimates (RE) in the previous year.
“The revenue loss to the Centre after the excise duty cut is estimated at Rs 86,000 crore in the remainder of FY23 after the duty cuts. Given the robust trends for April-May 2022, and the anticipation of sustained healthy momentum of activity, we expect Central goods and services tax inflows in FY23 to overshoot the BE by Rs 1.15 trillion. Assuming 14 per cent YoY growth in FY23, direct taxes are expected to surpass the FY23 BE by Rs 2.0 trillion, ” said Aditi Nayar, chief economist, ICRA.
Most cities posted a growth rate of 30 per cent and above in direct tax collection in the first quarter -- Mumbai (60 per cent); Bengaluru and Delhi (56 per cent); and Chennai and Pune (40 per cent).
Advance tax is paid in four instalments rather than at the end of the fiscal year. It is considered an indication of economic sentiment. The first instalment, or 15 per cent, is to be paid by June 15, the second by September 15 (30 per cent), the third by December 15 (30 per cent), and the rest by March 15.