The Centre’s tax revenue for the current fiscal year is expected to remain subdued due to slower-than-expected nominal GDP growth. Early indications of this trend have already emerged, with gross tax collections in the first four months of the fiscal year showing a year-on-year growth rate of only 2.83%. From April to July, the Central government collected Rs 8.94 lakh crore in gross taxes, compared to Rs 8.69 lakh crore during the same period the previous year. In the previous fiscal year (2022-23), the government’s gross tax revenue grew by over 10%, whereas this year, a similar level of growth has been budgeted – Rs 33.6 lakh crore in FY24 compared to Rs 30.53 lakh crore in FY23.
Analysts anticipate a slowdown in tax collections for FY24 due to the lower-than-expected nominal GDP growth rate. First-quarter GDP figures revealed that nominal GDP, calculated at current prices, grew by only 8%, down from 10.4% in the previous quarter. Real GDP, calculated at the base year price of 2011-12, grew at 7.8% during the first quarter. The government has set a target of 10.8% nominal GDP growth for FY24. Nominal GDP accounts for the impact of inflation, and thus, it is higher than the real GDP figure. Wholesale inflation, a significant contributor to nominal GDP calculation, turned negative in the first quarter.
In the initial four months of the fiscal year, corporate tax collections experienced a year-on-year decline of over 10%, totaling Rs 1.76 lakh crore, while personal income tax collections saw modest growth of 6.4% to reach Rs 2.57 lakh crore. Excise duty collections also contracted by 10% to Rs 76,200 crore. However, Central GST collections exhibited healthy growth of 16.6% during the April-July period.
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