NEW DELHI: The Centre, while presenting its full Budget in July, is likely to stick to its tax revenue estimates made during the interim Budget, despite witnessing a higher-than-anticipated growth in tax collections so far, according to an official source. This is even as the non-tax revenue estimates will see a sharp revision upwards owing to the higher dividend announced by the Reserve Bank of India.
“So far, the tax revenues are growing at a pace higher than around 11% pegged in the Budget,” said an official. “But the full Budget is unlikely to see any revision in revenue estimates.”
The FY25 interim Budget has assumed gross tax collections (GTR) to grow 11.5% on year to Rs 38.2 trillion from the FY24 revised estimate (RE) of Rs 34.4 trillion, driven primarily by a sharp growth in direct tax mop-up. The projected GTR growth in FY25 implies a tax buoyancy of 1.1 in the next fiscal, given the 10.5% nominal GDP growth estimate.
The source said that so far in FY25, the growth rates being recorded in GST and personal income tax (PIT) collections are around 14%.
The interim Budget has projected corporate tax (CIT) and PIT collections to grow 13% and 13.1%, respectively, in FY25, to Rs 10.4 trillion and Rs 11.6 trillion; and the central GST mop-up at 13.1% to Rs 9.2 trillion.
In February, revenue secretary Sanjay Malhotra had told FE that the FY25 tax estimates are “very realistic”. “The buoyancy of 1.1 after the buoyancy of 1.4 (FY24) is a reasonable assumption,” he had said.
The gross tax collections figure for April will be released on May 31.
Meanwhile, on Wednesday, the RBI’s central board of directors approved a record-surplus transfer of Rs 2.11 trillion to the Centre’s kitty for FY24. Since, this amount is more than double of what was pegged in the interim Budget, analysts say that the Centre may cut its gross borrowing by a substantial margin this fiscal.
“The government can reduce its dependence on market borrowings, which are currently budgeted at Rs 14.13 trillion (gross) and help lower borrowing costs. Lower-than-expected borrowings will have a softening impact on yields,” said Bank of Baroda in a research note.
But official sources indicated the government may use the extra cash on incurring extra expenditure, particularly on scaling up capex. “The new government will take a call on how to use extra receipts,” a highly-placed source had told FE on Wednesday.
The extra receipts are pegged at Rs 1.21-1.31 trillion (0.37-0.4% of GDP), given that the interim Budget had factored in Rs 80,000-90,000 crore dividend from the RBI for FY25.
Speaking to FE, finance secretary TV Somanathan on Wednesday said the positive fiscal impact of the higher dividend compared to FY25BE will be 0.2-0.3% of GDP.
“The government will keep managing its cash to the best extent possible to minimise interest costs,” Somanathan said when asked if the government would further buy back bonds.
Source: The Financial Express