Formal sector, administration raises tax
kitty 29% in Apr-July from FY20
and indirect tax collections are one of the rare parameters of the economy that
have shown growth over the pre-Covid levels in the first four months of the
current financial year.
tax collections of the Centre before devolution to the states rose almost 29
per cent during April-July of 2021-22 over the corresponding period of 2019-20
the collections grew by 83 per cent. This growth was misleading since it comes
on a 30 per cent drop in tax mop-up a year earlier.
growth over even the pre-Covid period was attributed by experts to economic
recovery, better performance of the organised sector at the expense of the
unorganised sector in these Covid-hit times and improved tax administration and
officials said the rise in tax collections are because of the fact that the
economy is increasingly getting formalised which is helping tax collections.
chief economist Aditi Nayar said the listed corporates have seen a sharp YoY
revenue recovery in Q1 of FY22, which is likely to have supported the revival
in direct taxes, amidst a feeble performance of smaller and less formal
Ratings chief economist Madan Sabnavis attributed the rising growth in tax
collections to increase in consumption.
the economy picks up with lockdowns being relaxed or lifted, there will be more
goods and services purchased. This in no way is reflective of the health of
sectors or any segment," he said.
said corporate profits are up due to the base effect and fewer job losses are
there this time which are leading to increase in the income tax collections.
Nangia of Nangia Andersen said the buoyancy in direct tax collections is
suggestive of recovery of industrial and construction activity, flourishing
exports and service sector growth from the pandemic blues.
uptick in economic activity and increased consumer spending pushed India back
on the growth trajectory. There has been a massive inflow of funds in the
capital market by all classes of investors resulting in the jump in collection
of securities transaction tax (STT)," he said.
yielded over 60 per cent higher revenues to the exchequer in the first five
months of 2021-22 y-o-y.
experts attributed growth in indirect tax collections to the increase in
enforcement action by the government.
Mohan, senior partner AMRG Associates, said that factors like lifting up of the
lockdown, pent up suppressed demand for consumer products, shifting the economy
from unorganized sector to organized sector, increased pace of recoveries by
the tax department, and a multi-fold increase in commodity prices since 2021
have contributed to the rise in tax collections recently.
Mani, partner at Deloitte India said that the increasing focus on detection of
GST evasion using data analytics has significantly contributed to the robust
goods and services tax (GST) collections in recent months .
said when sectors open up, people spend and GST goes up. He, however, said
states are still being compensated which implied that collections are not
Jain, partner at PwC, said the high GST and customs collections clearly
indicate that the economy is on an upswing and demand is picking up.
GST and customs collections clearly indicate that the economy is on an upswing
and demand is picking up. The tax base has expanded in the wake of increased
use of technology and tightening of tax administration. Industry as well as
consumers have adapted quickly to the challenges posed by the pandemic, Jain
year in September, the government brought in Aadhaar-based GST registration to
keep out fraudulent elements. Besides, through data sharing of income tax,
customs and GST, the government is able to track income mismatches through data
analytics using artificial intelligence tools. A government official pointed
out that they can now draw an entire network diagram if any fake bill has been
generated by any non-existent or fake dealers.
addition, the introduction of e-invoicing in phases has also plugged loopholes
in the GST system. As the input tax credit and output tax details are readily
available, it becomes easier for the tax officials to track fake input credit.
From April one this year, it has been made mandatory for entities with a
turnover of over Rs 50 crore.
customs, Mani pointed out that while the recent increases in IGST collections
on imports could be attributed to the surge in imports, the recent chip and
container shortages could impact future collections.
said growth in excise collections benefited from the hike in rates last year
and the recovery in mobility after the ebbing of the second wave.
should be noted that collections from excise duty along with customs rose in
2020-21 despite the fact that the year faced Covid-induced lockdowns and GDP
contracted massive 24 per cent. While customs duty gave merely 0.24 per cent
higher collections during the year over the previous year, excise duty made
government coffers richer by 24 per cent. It was largely due to an increase in
excise duty on petroleum. For instance, excise duty on petrol was hiked from Rs
19.98 per litre to Rs 32.9 last year.
said customs duty collections are being powered by the surge in gold imports.
For instance, gold imports in July surged to $4.2 billion from $1.78 billion a