Increased Tax revenue of Center
Have you ever wondered that who is financing the government for infrastructure development and welfare schemes? The answer is “you”. All the schemes which the government is running are financed by a tax that the public pays in the form of direct and indirect tax. Even a person who is not earning is also paying the tax in form of GST for education and products which he buys. Taxes are getting devolution to lower-level governments by the union government.
With all major tax heads yielding revenues significantly higher than the respective revised estimates (REs) shown in the Budget, the Centre has appropriated an additional Rs 78,000 crore as net (post-devolution) tax revenue in FY21. This means if other inflows and outflows stick to Budgeted numbers, the fiscal deficit for the year could be 46 basis points lower than the budgeted 9.5% of the nominal gross domestic product (GDP) if one goes by the second advance estimate of national income. Increased Tax revenue of the Center will help the government to plan many welfare and development schemes. Increased Tax revenue of Center plays a vital role in the upliftment of society.
According to two statements issued by the finance ministry this month, gross tax receipts (GTRs) – net of refunds but before transfers to the states – in the last financial year were up to Rs 1.22 lakh crore or 6.4% over the RE at Rs 20.16 lakh crore. In FY20, GTR saw a rare decline – the collections in the year were Rs 20.04 lakh crore compared with Rs 20.76 lakh crore in FY19. Increased Tax revenue of Center is a sign of recovery of the Indian economy.
FE has estimated net receipts (post-devolution) in FY21 at Rs 14.2 lakh crore, up 5.8% over RE and 4.8% higher than such receipts in FY20. Increased Tax revenue of Center will increase the devolution amount.
The year-on-year growth in tax collections in FY21 is a remarkable feat given the rarity of an economic contraction in the year (nominal GDP is seen to have shrunk 3.8% in the year).
Of course, a large part of the growth in tax revenue is attributable to the steep hike in assorted taxes (excise/cess) on petrol and diesel, but improved buoyancy is visible across other taxes like GST, Customs, and personal income tax. Excise revenue in FY21 was up a steep Rs 1.23 lakh crore over the Budget Estimate and nearly Rs 30,000 over RE. Even corporate tax revenue exceeded the RE level by Rs 11,000 crore.