Tax revenue buoyancy remains strong in FY24, said Economists

Tax buoyancy in FY24:  Buoyancy in tax receipts this year, led more by direct taxes, is likely to result in gross tax collections exceeding the FY24 budget estimate (BE) by nearly Rs 550 billion, analysts and experts opined. 

A report by Emkay also added that FY24 tax revenue continued to imitate the non-linear relationship between economic activity and taxes, significantly outdoing nominal GDP growth. 

“Net tax revenues are likely to exceed BE by ~Rs250bn, while total net revenue receipts will be higher by ~0.2 per cent of GDP – also helped by higher RBI dividends.  Almost 61 per cent of the gross tax collection target (vs 58 per cent of FY23P) was already met in the first eight months – one of the strongest seen in years,” the report added further. 

FY24 is seeing massive gains in personal income taxes (PIT) amid increasing formalization, better compliance, and improving growth momentum, followed by higher corporate tax collections due to healthy corporate profitability, and stealth benefits of GST-led formalization. 

“We see FY24E gross tax/GDP at 11.5 per cent of GDP (11.1 per cent BE),” Emkay added. 

Indirect Tax

On indirect taxes, the average monthly GST collection rate in FY24 has been healthy and picked up more towards the latter half. Assuming relatively slower growth in the remainder of FY24, the monthly total GST average will still be close to Rs 1.55 trillion, which would imply that total GST collections may match the BE of Rs 9.57 trillion and clocked almost 10-12 per cent higher YoY.