Express News Service
NEW DELHI: The Centre’s tax collections in the current financial year may remain muted as nominal GDP growth has been slower than expected. The signs of the same have started to show with gross tax collections in the first four months of the financial year showing year-on-year growth of only 2.83%.
In the April-July period, the gross tax collection of the Central government was Rs 8.94 lakh crore compared to Rs 8.69 lakh crore in the same period the previous year. Last financial year (2022-23), the government’s gross taxes grew by over 10%, while this year the government has budgeted for a similar kind of growth – Rs 33.6 lakh crore in FY24 against Rs 30.53 lakh crore in FY23.
Analysts expect tax collections in FY24 to slow down due to a lower-than-expected nominal GDP growth rate. The recently released first quarter GDP numbers showed that the nominal GDP, or GDP calculated at the current prices, grew at only 8% compared to 10.4% in the previous quarter. In the first quarter, the real GDP, or GDP calculated at the base year price of 2011-12, grew at 7.8%. The government has budgeted for a nominal GDP growth of 10.8% in FY24.
With a low nominal GDP growth, tax revenue growth is expected to be muted, says Dr DK Srivastava, chief policy advisor, EY India. “As per the CGA (Controller General of Accounts) data, the buoyancy of the Centre’s gross tax revenues (GTR) is only 0.4 in the first quarter. If low nominal GDP growth is combined with a significantly low buoyancy, the resultant tax revenue growth is expected to be considerably low,” says DK Srivastava.
Gaura Sengupta, India economist, at IDFC First Bank, told TNIE that the nominal GDP in the current financial year would be 9% or lower against the government’s nominal GDP growth projection of 10.8%.Nominal GDP captures the impact of inflation or price rise, and therefore, it is higher than the real GDP number. Wholesale inflation, which contributes majorly to nominal GDP calculation, turned negative in the first quarter.
In the first four months of the financial year, corporate tax collections fell by over 10% year-on-year to Rs 1.76 lakh crore, while personal income tax collections grew by a modest 6.4% to Rs 2.57 lakh crore.Excise duty collections also contracted by 10% to Rs 76,200 crore.
However, Central GST collections showed a healthy growth of 16.6% during the April-July period.
NEW DELHI: The Centre’s tax collections in the current financial year may remain muted as nominal GDP growth has been slower than expected. The signs of the same have started to show with gross tax collections in the first four months of the financial year showing year-on-year growth of only 2.83%.
In the April-July period, the gross tax collection of the Central government was Rs 8.94 lakh crore compared to Rs 8.69 lakh crore in the same period the previous year. Last financial year (2022-23), the government’s gross taxes grew by over 10%, while this year the government has budgeted for a similar kind of growth – Rs 33.6 lakh crore in FY24 against Rs 30.53 lakh crore in FY23.
Analysts expect tax collections in FY24 to slow down due to a lower-than-expected nominal GDP growth rate. The recently released first quarter GDP numbers showed that the nominal GDP, or GDP calculated at the current prices, grew at only 8% compared to 10.4% in the previous quarter. In the first quarter, the real GDP, or GDP calculated at the base year price of 2011-12, grew at 7.8%. The government has budgeted for a nominal GDP growth of 10.8% in FY24.googletag.cmd.push(function() {googletag.display(‘div-gpt-ad-8052921-2’); });
With a low nominal GDP growth, tax revenue growth is expected to be muted, says Dr DK Srivastava, chief policy advisor, EY India. “As per the CGA (Controller General of Accounts) data, the buoyancy of the Centre’s gross tax revenues (GTR) is only 0.4 in the first quarter. If low nominal GDP growth is combined with a significantly low buoyancy, the resultant tax revenue growth is expected to be considerably low,” says DK Srivastava.
Gaura Sengupta, India economist, at IDFC First Bank, told TNIE that the nominal GDP in the current financial year would be 9% or lower against the government’s nominal GDP growth projection of 10.8%.
Nominal GDP captures the impact of inflation or price rise, and therefore, it is higher than the real GDP number. Wholesale inflation, which contributes majorly to nominal GDP calculation, turned negative in the first quarter.
In the first four months of the financial year, corporate tax collections fell by over 10% year-on-year to Rs 1.76 lakh crore, while personal income tax collections grew by a modest 6.4% to Rs 2.57 lakh crore.
Excise duty collections also contracted by 10% to Rs 76,200 crore.
However, Central GST collections showed a healthy growth of 16.6% during the April-July period.
