The central government's tax revenue in the April to June quarter has already reached a quarter of the budgeted estimate for the current financial year, indicating that there could be space to lower cess on petrol and diesel, according to ICRA Ltd.
"The major tax revenue streams of the Government of India aggregated to around Rs. 5.6 lakh crore in Q1 FY22, which is 25.1% of the FY22 Budget Estimate for gross tax revenues of Rs 22.2 lakh crore," the ratings and research agency said in a report. "This is meaningful, as the size of the tax base typically tends to be proportionately muted in the first quarter of each fiscal."
Last week, the finance ministry informed the Lok Sabha that tax collections for the first quarter stood at Rs 5.58 lakh crore:
Direct tax collection stood at Rs 2.47 lakh crore
Indirect tax collection stood Rs 3.11 lakh crore
As direct tax, the government garnered Rs 1.21 lakh crore in corporation tax and Rs 1.20 lakh crore in personal income tax in the first quarter, Minister of State for Finance Pankaj Chaudhary told Lok Sabha in a written reply on July 19.
Under indirect tax, goods and services tax collection was at Rs 1.17 lakh crore, customs duty garnered Rs 41,800 crore and Rs 1.02 lakh crore was collected as excise duty, the minister said.
Tax revenue in Q1 FY22 is nearly 40% higher than the pre-Covid level of Q1 FY20, ICRA pointed out. It projected that gross tax revenue for the central government would surpass the FY22 budgeted estimate, led by indirect taxes.
Corporation tax, personal income tax and CGST receipts in Q1 FY22 stood at 21-22% of the budget estimate.
Union excise duty and customs duty collections have already crossed a considerable 30% of the respective budgeted targets.
GST compensation cess inflows aggregated to Rs. 24,600 crore in Q1 FY22, nearly 25% of the FY22 BE.
The union budget estimated gross tax revenue in FY22 at Rs 22.17 lakh crore. This is a modest 9.5% higher than the provisional collections of Rs. 20.2 lakh crore in the previous year, the report noted. This embedded growth of 9.5% is substantially smaller than ICRA's estimates of nominal GDP growth of 15-16% in FY22.
The healthy tax inflows in Q1 FY22 suggest that there is some space to reduce the cesses on petrol and diesel, which will both boost consumption sentiment and ease inflationary pressures. This would allow monetary policy normalisation to be postponed, in a bid to continue to support economic activity in an uncertain growth environment.Aditi Nayar, Chief Economist, ICRA
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