FY23 direct tax collections marginally overshoot RE – The Financial Express

The Financial Express
Direct tax collections in 2022-23, net of refunds, came in at Rs 16.61 trillion, exceeding the revised estimate (RE) of Rs 16.5 trillion by 0.69% despite liberal refunds, the finance ministry said on Monday, in what reflected continued tax buoyancy. The government had steeply increased the direct tax target in the recent Budget, by pegging the RE at 16.2% higher than the Budget estimate of Rs 14.2 trillion.
The 2022-23 mop-up was up 17.63% over Rs 14.12 trillion collected in the previous fiscal.
“The provisional direct tax collections (net of the refunds) have exceeded the BE by 16.97% and RE by 0.69%,” the ministry said.
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The gross collections of direct taxes (before adjusting for refunds) for 2022-23 was Rs 19.68 trillion, registering a 20.33% growth over Rs 16.36 trillion in 2021-22. Gross corporate tax collections grew 16.9% to Rs 10.04 trillion last fiscal against Rs 8.59 trillion in 2021-22.
The pace of growth of personal income tax collection was even faster. Gross personal income tax receipts (including securities transaction tax) grew 24.2% to Rs 9.6 trillion in 2022-23 versus Rs 7.73 trillion in the previous fiscal.
The income tax department issued refunds worth Rs 3.07 trillion in 2022-23, which was a 37.42% increase over refunds of Rs 2.24 trillion issued in 2021-22.
The data is provisional and will undergo further revision by the end of the month as some payments may still pour in over the next few days.
The targets for corporate and personal income tax (post refunds) were hiked to Rs 8.35 trillion and Rs 8.15 trillion, respectively, in the RE from the BE of Rs 7.2 trillion and Rs 7 trillion. For FY 24, the Union Budget has estimated direct tax collection at Rs 18.23 trillion with corporate tax expected to fetch Rs 9.23 trillion and personal income tax another Rs 9 trillion.
Tax officials had been concerned about meeting the ambitious increase in targets amidst a slowdown in economic activities, which had also started to impact corporate profitability and tax payments. However, a focus on compliance measures is seen to have helped improve the kitty.
“With direct taxes exceeding the revised estimates, the likelihood of the fiscal deficit overshooting the revised target has reduced,” said Aditi Nayar, chief economist, head – research and outreach, Icra.
Madan Sabnavis, chief economist, Bank of Baroda, noted that corporate profits had been falling for three successive quarters. “The government may have underestimated its corporate tax estimate or companies may have paid more advance tax to avoid any penalties, and these could be reversed later through refunds,” he said, citing this as a possible reason for the growth in corporate tax collections. Collections on account of penalties for non-compliance by the tax department on various companies could also have boosted corporate tax collections.
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Gokul Chaudhri, president, Tax, Deloitte India, said, “The direct tax collection reflect the improving business performance leveraging on the economic reforms and rebound from the pandemic. The momentum is certainly welcome as it should lead to greater confidence in the outlook for the new financial year.”
The revised estimates for 2022-23 had increased the tax revenue target (before devolution to states) by 10.4% to Rs 30.43 trillion against the BE of Rs 27.57 trillion.
The Centre is also likely to have met its target for indirect tax collections, which was pegged at Rs 13.85 trillion in the revised estimates for FY23 against the initial target of Rs 13.3 trillion. This increase was due to an expectation of higher collections from the goods and services tax as the target for customs duty and union excise duty were revised downwards. GST collections for last fiscal were robust at Rs 8.42 trillion against the RE of Rs 8.54 trillion, according to the provisional data. It is expected that customs duty and union excise duty have also met the RE of Rs 2.1 trillion and Rs 3.2 trillion, respectively. For FY24, indirect tax revenue is pegged at Rs 15.29 trillion.
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