Icra, Auto News, ET Auto
New Delhi: With first quarter gross tax cleanup reaching INR 5.6 million rupees, icra Friday’s notes said the government is expected to exceed the budgeted tax collection target of INR 22.2 lakh crore for 2021-2022, led by Indirect taxes.
The government has budgeted a modest 9.5% growth in tax revenue to INR 22.2 lakh crore for EX22, on FY21 collections of INR 20.2 lakh crore. However, despite the second wave of the pandemic, tax collections in the April to June quarter reached INR 5.6 lakh crore, 39% higher than the first quarter of FY2020. As stated differently, this represents 107% higher than the first quarter of FY21 and 25.1% of the full-year target, according to an analysis by Icra.
The first quarter is traditionally subdued for tax collection, as economic activity remains tepid.
the Ministry of Revenue has yet to officially release the tax collection data, but the Ministry of Finance informed the Lok Sabha on July 19 that the tax revenue catch-up in the first quarter reached INR 5.6 lakh crore.
The department also informed the House that the gasoline excise duty and diesel earned INR 94,181 crore in the first quarter.
“Given that tax receipts in the first quarter were 39% higher than the pre-COVID level (from the first quarter of FY20), we expect gross tax revenue to exceed the FY22 budget estimate by INR 22.2 lakh crore. The growth of the tax catch-up is driven by indirect taxes, mainly taxes on petroleum products,” said Icra chief economist Aditi Nayar.
According to her, first quarter collections at INR 5.6 trillion are 107% higher than INR 2.7 lakh crore in the first quarter of FY21 when the whole country was under lockdown in the year. last.
“But more significantly, it’s 39% higher than the pre-COVID level in the first quarter of FY20,” she said.
She further stated that while first quarter corporate tax, personal income tax and central GST revenue was 21-22% of budget forecast, revenue from excise and customs duties were already over 30% of budget forecasts, spurred by high fuel taxes as well as a relatively faster recovery in international trade.
Additionally, the GST compensation catch-up hit INR 24,600 crore in the first quarter, almost 25% of the budget estimate. It also suggests that the full-year collections could exceed the budget estimate by INR 1 lakh crore, which will help ease concerns over GST offsets to states through subsidies, Nayar said.
“Given these figures, our calculations suggest that the FY22 budget estimate of gross tax revenue of Rs 22.2 lakh crore can easily be exceeded, even if there is a contraction of 5% over the past few years. next three quarters, which seems unlikely despite the lingering uncertainty about growth.
“In absolute terms, even though gross tax collection over the next three quarters falls short of the first quarter figures by a whopping INR 95,000 crore, the fiscal target for the full year will not be missed” , Nayar noted.
The healthy first-quarter fiscal cleanup suggests that “there is room to cut gasoline and diesel taxes, which will boost consumer sentiment on the one hand and ease inflationary pressures on the other.” , she said, adding “this would allow monetary policy normalization to be postponed, in order to continue to support economic activity in an uncertain growth environment”.
In April 2020, the government raised the excise duty on petrol from INR 19.98 per liter to INR 32.9 and on diesel from INR 31.8 from INR 15.83 per liter to recoup the gains resulting from the fall in international oil prices to multi-year lows while that the pandemic has engulfed demand.
This led to fuel tax collections which climbed to INR 3.35 crore lakh in FY21 from INR 1.78 crore in FY20.