Tax collections to exceed budget estimates

by Manasi Swamy

Central Government achieved 52.3 per cent of its net tax revenue target for 2022-23 in the first half of the fiscal. Of the Rs.19.3 trillion net tax revenues budgeted for the full fiscal, it garnered Rs.10.1 trillion by September 2022. Tax revenues had also crossed the half way budgeted mark in first six months of a fiscal in the previous year, 2021-22. The government had collected 59.6 per cent of the budgeted tax revenues by September. Its annual tax collections that year had overshot the budget estimates by a huge margin. These two are the rare instances of such tax buoyancy in the last two and a half decades.

Net tax revenues are expected to overshoot the budget estimate by a robust Rs.2 trillion. These additional tax revenues would enable the government to comfortably absorb bulk of the additional expenditure it is likely to incur on subsidies and MGNREGS this year.

The government had budgeted for a modest 9.6 per cent increase in both, gross tax collections and net tax revenues for 2022-23 over the revised estimates for 2021-22. Its tax collections during 2021-22 turned out to be about three per cent higher than the revised estimates, thereby yielding a broader base than what the Union Budget had considered. On this, the government managed to achieve a 17.6 per cent growth in its gross tax mop-up to Rs.13.9 trillion in the first half of 2022-23. This was backed by better-than-expected growth in income tax, corporation tax and goods & services tax (GST). The latter also had a contribution of higher-than-anticipated inflation. Besides, the government partially made up for the loss of revenue from excise rate cuts on petrol and diesel, announced in May 2022, by imposing windfall tax on crude oil production and special duties on exports of petroleum fuels with effect from July 1, 2022. Earlier during the year, it had hiked the duty on iron & steel exports and gold imports.

We expect the biggest gains over budget estimate to come from income tax. Gross collections of income tax in 2022-23 are projected to touch Rs.8.1 trillion, exceeding the budget estimates by Rs.1.1 trillion. Gross collections of Corporation tax and GST are also projected to overshoot the budget estimates by Rs.860 billion each. After accounting for a shortfall in excise duty collections, total gross tax collections during 2022-23 are likely to top Rs.30.4 trillion, yielding Rs.2.8 trillion over and above the budget estimates. The expected gains reduce to Rs.2 trillion at the net tax level after accounting for the state’s share in central taxes and NCCD.

The government’s non-tax revenues and disinvestment receipts are expected to be in deficit, of around Rs.200 billion each. As against budget estimates of Rs.2.7 trillion for 2022-23, the government is expected to mobilise only Rs.2.5 trillion of non-tax receipts due to lower than budgeted transfer of surplus by the Reserve Bank of India (RBI). With big ticket stake sales - BPCL and IDBI Bank getting postponed to next fiscal and the government taking a decision of selling only a part of its remaining stake in Hindustan Zinc this year, disinvestment receipts are expected to reach a maximum of Rs.450 billion this fiscal, as against the budget estimate of Rs.650 billion.

This implies that the government’s total non-debt receipts, i.e. receipts excluding borrowings in any form, would touch Rs.24.4 trillion in 2022-23 as compared to the budgeted Rs.22.8 trillion. This provides a fiscal headroom of about Rs.1.6 trillion. The government, however, requires a bigger headroom than this considering its mounting subsidy burden if it has to meet its budgeted fiscal deficit target in absolute terms of Rs.16.6 trillion.

Government expenditure was on a tight leash in the first half of 2022-23. It spent only 46.2 per cent of its annual budgeted allocation. This is the slowest pace of expenditure observed in the last 13 years. In absolute terms, expenditure increased year-on-year by 12.2 per cent to Rs.18.2 trillion. Revenue expenditure was up by six per cent, while capital expenditure grew by a robust 49.5 per cent.

The government had budgeted for subsidies of Rs.3.56 trillion for 2022-23. However, post announcement of the budget, it decided to provide additional Rs.1.1 trillion for fertiliser subsidy, Rs.200 billion to compensate state-run oil marketing companies (OMCs) for under-recoveries on sale of subsidised LPG and extension of the free foodgrain distribution programme PM-GKAY till December 2022 which had an outlay of Rs.1.25 trillion. This has pushed up the annual subsidy requirement for 2022-23 by Rs.2.25 trillion to Rs.5.81 trillion, after accounting for the savings made on lower wheat procurement during the rabi season.

The Ministry of Finance has asked the Union ministries and departments to make savings by cutting down on avoidable expenditure. However, these savings are likely to get offset by the additional outlay on rural employment guarantee scheme MGNREGS. The Ministry of Rural Development that runs the scheme has recently sought Rs.250 billion over and above the budget allocation of Rs.730 billion for 2022-23. We believe that the Union Budget had under-provided for MGNREGS this year and the Ministry of Finance would grant the additional funds sought by the Ministry of Rural Development for this scheme.

Assuming that the government spends its full budget allocation of Rs.7.5 trillion for capital expenditure, its total expenditure during 2022-23 would increase to Rs.41.7 trillion. This is Rs.2.25 trillion higher than the amount budgeted for the fiscal.

This means that the fiscal deficit would overshoot the 2022-23 budget estimate of Rs.16.6 trillion by Rs.650 billion. Financing this additional deficit is not a major worry for the government. It has adequate cash balances with the RBI to cover the additional deficit. Last month, the government, in its official press release, had said that it planned to arrest its gross market borrowings in 2022-23 at Rs.14.21 trillion as against the budgeted amount of Rs.14.31 trillion.

Unemployment Rate (30-DAY MVG. AVG.)
Per cent
8.3 +0.7
Consumer Sentiments Index
Base September-December 2015
81.9 -0.2
Consumer Expectations Index
Base September-December 2015
81.6 0.0
Current Economic Conditions Index
Base September-December 2015
82.3 -0.6
Quarterly CapEx Aggregates
(Rs.trillion) Dec 21 Mar 22 Jun 22 Sep 22
New projects 4.04 8.60 4.88 3.53
Completed projects 2.86 1.32 1.18 1.33
Stalled projects 0.08 0.43 0.53 0.06
Revived projects 1.98 0.33 0.29 0.09
Implementation stalled projects 0.66 0.09 0.29 0.26
Updated on: 08 Dec 2022 8:28PM
Quarterly Financials of Listed Companies
(% change) Dec 21 Mar 22 Jun 22 Sep 22
All listed Companies
 Income 23.4 20.8 40.1 25.1
 Expenses 21.3 19.8 41.4 27.1
 Net profit 35.4 31.3 21.1 -3.0
 PAT margin (%) 9.0 8.8 7.2 7.7
 Count of Cos. 4,756 4,671 4,683 4,494
Non-financial Companies
 Income 29.3 24.8 50.1 27.8
 Expenses 28.8 25.7 52.9 31.5
 Net profit 19.2 9.8 8.3 -22.6
 PAT margin (%) 7.5 7.6 5.7 5.5
 Net fixed assets 2.0 3.9
 Current assets 15.0 19.3
 Current liabilities 11.7 10.8
 Borrowings 3.6 11.8
 Reserves & surplus 11.3 7.6
 Count of Cos. 3,439 3,387 3,414 3,330
Numbers are net of P&E
Updated on: 08 Dec 2022 8:28PM
Annual Financials of All Companies
(% change) FY20 FY21 FY22
All Companies
 Income 0.6 -0.9 25.8
 Expenses 0.4 -3.2 24.7
 Net profit -3.8 75.0 61.6
 PAT margin (%) 2.0 4.3 7.9
 Assets 9.0 9.9 9.9
 Net worth 4.7 12.0 14.2
 RONW (%) 3.4 6.8 11.8
 Count of Cos. 33,421 32,202 9,171
Non-financial Companies
 Income -1.1 -1.9 31.7
 Expenses -0.9 -3.9 31.5
 Net profit -20.4 62.2 60.2
 PAT margin (%) 2.2 3.9 6.9
 Net fixed assets 11.3 2.2 2.3
 Net worth 2.1 10.5 14.8
 RONW (%) 4.6 7.5 13.3
 Debt / Equity (times) 1.2 1.0 0.7
 Interest cover (times) 1.9 2.4 4.3
 Net working capital cycle (days) 82 88 55
 Count of Cos. 26,380 25,257 6,870
Numbers are net of P&E
Updated on: 05 Dec 2022 10:11AM