With the Union Budget around the corner, the revenue of the Centre is going to be in focus over the next few weeks. It is widely known that the intense lockdown in April and May has compressed both direct and indirect tax revenue, and achieving the budgeted growth will be next to impossible.
But there are a few silver linings — excise duty collections are going to be much higher this fiscal thanks to the hike in rates in May this year. Similarly, the booming stock market is going to result in higher securities transaction tax (STT) collections.
The CGA website has updated the revenue and expenditure numbers until this October. There was a shortfall of 41.4 per cent in tax revenue in the first seven months of the fiscal compared to the FY20. Non-tax revenue has witnessed a sharper contraction of 71.6 per cent due to lack of traction on the disinvestment front. But with the Air India and BPCL stake-sales likely to be closed soon, there could be some improvement in the shortfall.
Corporate tax collections between April to October 2020 were 36.67 per cent lower compared to FY20, perhaps due to the sharp contraction in the June quarter GDP leading to a drop in company profitability too. The contraction in income tax collection was much lower at 16.9 per cent as the salaried are likely to have taken a much lower hit.
According to recent reports, net direct tax collection between April 1 and December 15, 2020 was ₹4.95 lakh crore, compared to ₹6.01 lakh crore in the same period last year. This number indicates that direct tax collections have improved significantly since November, perhaps even surpassing the previous year’s collections in that period.
Other taxes, including the STT, banking transaction tax and fringe benefit tax, have recorded a 22.5 per cent jump in the April to October 2020 period. This jump could be on account of higher volume in stock exchanges during the lockdown resulting in higher STT collections.
As regards indirect taxes, excise duty collections up to October has shown the largest increase in absolute terms of ₹46,688 crore. This is largely due to the hike in excise duty on petrol by ₹10 per litre and on diesel by ₹13 per litre in May this year. The Centre had made the most of the drop in international prices in that period to hike prices. Though the overall sale of fuel dropped in that period, the hike in rates is likely to help shore the Centre’s kitty to a large extent this year.