Personal income taxes have helped lift the government’s overall tax revenues in the first half of fiscal 2025 as dip in company earnings and overall economic slowdown brought down corporate tax components such as corporation tax, GST, customs and excise duties.
Analysis of tax revenues during April-September 2024 from CGA (Controller General of Accounts) shows that while total tax revenue (gross) grew at 12 per cent year on year at ₹18.1 lakh crore, corporation tax at ₹4.6 lakh crore recorded only 2.3 per cent growth compared to the same period last year. On the contrary, riding on the overall broadening of tax base and better compliance, income tax revenue grew 25 per cent at ₹5.6 lakh crore. Customs duty grew 6.4 per cent, GST growth was at 10.4 per cent and excise duty grew just 3 per cent.
In terms of actual revenues as a percentage of budgets, gross tax revenue for April-September is at 47.2 per cent of the budgeted revenue with actual corporation tax and excise duty only at 45.2 per cent and 40.3 per cent of budgets respectively.
Budgeted growth
Further, when seen against budgeted growth rate for FY25, personal tax revenue for the half year grew well above the 13.6 per cent budgeted growth rate, while corporate tax growth falls short of the budgeted 12 per cent mark. GST growth falls marginally short in H1, excise duty growth is short by 1.5 percentage points, and customs duty has grown more than the budgeted 2 per cent.
“While the overall slowdown in the economy has led to lower corporate earnings and corporate tax, companies are still in a position to expedite growth in the second half and we are already seeing signs of revival,” Madan Sabnavis, chief economist, Bank of Baroda, said. As for the Centre’s capex outlay for FY25 amid lower revenues in the first half, Sabnavis said that the planned capex of ₹1.1 lakh crore for FY25 is also higher compared to that of the previous fiscal and in that sense also an ambitious target.
As per the Income tax department’s recent direct tax collections data, corporate tax has picked up. In FY25 (till November 10), gross corporate tax collection was ₹6.6 lakh crore, a growth of around 18 per cent year on year.
Ajay Srivastava, Founder, Global Trade Research Initiative, said that factors such as duty-free imports and FTAs (free trade agreements) determine customs duty revenue. “The sharp cut in customs duty on gold is likely to have impacted customs revenue this year,” he said. “This could also be why the government budgeted for a lesser growth in FY25 in the Union Budget,” he added.
Analysts note that excise duty could have been hit by slowing diesel consumption, typically seasonal in the months of July and August.
Analysts at India Ratings said in a note on Wednesday that despite the slowdown in economic activity in H1FY25, the Union government’s fiscal deficit in FY25 will still be around 19 bps lower than the budgeted deficit for FY25. The agency also expects gross tax revenue as per cent of GDP in FY25 to be 28 bps higher than FY25 (BE). Income tax and corporate tax are estimated to contribute 80.94 per cent and 10.53 per cent, respectively, to the additional gross tax revenue.