INDIA'S REVENUE RECEIPT (FY-21)
Udayan Hazarika
(The writer can be reached at udayanhazarika@hotmail.com)
Government of India while preparing the budget 2020-21 (FY-21), expected that the gross tax revenue (GTR) will grow by 12 per cent while the direct tax was estimated to grow by 12.7 per cent and the indirect tax as a whole was expected to grow by 11.1 per cent. But later the estimates were revised downward (with growth of only 5.46 per cent in case of GTR over the previous year) due to the prevailing pandemic conditions. Now the Government have come up with some preliminary revenue collection statistics highlighting their exceptional performances in connection with the collection of revenues in the year 2020-21(FY-21). Finance Ministry seems upbeat about this performances despite the fact that released figures are only provisional and yet to be reconciled and then when finalised, it may not give the same trend. According to the statements issued by the Finance Ministry this month, gross tax receipts (GTR), net of refunds but before transfers to the States, in the last financial year (FY-21) comes to Rs 21.38 lakh crore – i.e., an increase of Rs 1.22 lakh crore, or 6.04 per cent, over the revised estimates fixed at Rs 20.16 lakh crore. This is marginally higher than the Rs 20.04 lakh crore collected as GTR in the FY-20 which registered a rare decline as against the amount collected in the year 2019-20 i.e. Rs 20.76 crore. This makes one thing very clear that the volume of tax collection to be seen against the collections made in a normal year say FY 20 and not against the figures which were revised downward.
Direct taxes occupy a major share of the tax revenues of the Government. The collection of direct taxes (personal income tax and the corporation tax) has not been in tune with the expectation as there was a fall in the total collection from Rs 10.5 lakh crore in 2019-20 to Rs 09.45 lakh crore in 2020-21. However, the government has a point to rejoice as this collection exceeds the revised target set at Rs 9.05 lakh crore. The net direct tax collections include Corporation Tax (CIT) at Rs 4.57 lakh crore and Personal Income Tax (PIT) including Security Transaction Tax (STT) at Rs 4.88 lakh crore. Evidently, this is due to decrease in the volume of disposable income which is in the form of holding back of a portion of the disposable income, or withholding of dearness allowances etc., due to the pandemic.
In the indirect tax front, the data show a rising trend with increase in volume of collection to the tune of 12 per cent. The provisional data for the year 2020-21 (FY-21) shows a collection of Rs 10.71 lakh crore as against Rs 09.54 lakh crore in the previous year (FY-20). This increase is mainly due to the hike in customs duties coupled with the hike in petrol and diesel prices. The increase is therefore attributable to the administrative rearrangements only and not efficiency of the administrative machinery engaged in the collection. Due to the hike in customs duty, collection rose by about 8.2 per cent as against the revised estimates of Rs 09.89 lakh crore. This is raw data and reconciliation is yet to be done. It may however be noted that last year's collection was higher by about 21 per cent compared to the FY-20 which in absolute terms comes to Rs 1.32 lakh crore.
Similarly, in respect of another component of indirect tax i.e. excise duty (Central excise), the collection set an exceptional record which again is attributable to the tremendous hike in the excise duty on the two fuels namely petrol and diesel. In fact this is not a new phenomenon, this has been continuing since this government have been taking over charge in the year 2014-15. In 2014-15, the rate of excise duty was only Rs 9.48 per litre of petrol which rose to the level of Rs 32.90 during the subsequent periods. Similarly, in case of diesel the duty has gone up from Rs 3.56/ litre to Rs 31.80/litre. At this rate, the excise duty comprises about 36 to 40 per cent of the price per litre petrol /diesel and when taken all other taxes together, it constitutes more than 55 - 60 per cent of per litre petrol prices with State wise variation from 1 per cent 1.5 per cent. As per statement made by the Union Minister of State for Finance Sri Anurag Thakur in the Parliament, "The total central excise duty (including basic excise duty, cesses and surcharge) was increased by Rs 3 per litre on petrol and diesel with effect from March 14, 2020. It was further revised upwards by Rs 10 per litre on petrol and Rs 13 per litre on diesel with effect from May 6, 2020."
Data from the Controller General of Accounts shows that collection from central excise during the April-November period of FY2020-21 was more than Rs 1.96 lakh crore as against over Rs 1.32 lakh crore during the corresponding period of FY2019-20. The increase is evidently for the hike in the rate. In May 2020, total excise duty collection was Rs 10,876 crore as against Rs 17,447 crore in May 2019. Immediately, after the hike in June, the collection went up to Rs 24,391 crore as against Rs 19,618 crore of the corresponding period in the previous year, despite the fact that consumption remained as low as 2200 thousand Mt tonne (June 20) as against 2639 thousand MT in June 2019. This trend continued till December for which data is available. These hikes took place at a time when there was sharp drop in international oil prices depriving the consumers from the gain that would otherwise have accrued to them.
Due to the above mentioned unprecedented hike and the resultant significant rise in the collection of customs and excise duties, the overall tax collection reached Rs 20.16 lakh crore in FY-21 as against Rs 20.05 lakh crore in the previous year despite the fact that there was a 10 per cent fall in the direct tax collection and a fall of almost 21 per cent in the GST collection. As per available data, the total collection of gross GST revenue has been Rs 10.12 lakh crore during April 2020- February 2021 as against a total gross GST collection of Rs 12.22 lakh crore in 2019-20. In the month of March 21, the gross GST revenue collected is at a record high of Rs 1,23,902 crore. Thus, in all total collection in the year FY 21 comes to Rs 11.36 lakh crore which is still falling short of the collection in FY 20 by about 7 per cent.
It appears that the Government is expecting a quick result in the fiscal consolidation front. An economy does not follow the rules of crash course and gets revived so quickly especially when devastated by the pandemic like COVID-19. Rebound is a slow process for developing economies and it has its roots in the confidence of the people. The trend shown now in the receipt front are the results of the unsettled behaviours of the consumers and sellers and therefore it is not deep rooted- it may change at any time depending on the circumstances generated by external factors such as pandemic again. Hence it will be wrong to accept this trend as recovery path.