Govt's direct tax collections jump. Here's why it matters

The Indian government’s coffers seem to be overflowing with cash this year, at least as compared to last year. 

The finance ministry has said that the net direct tax collection grew 24 per cent to Rs 8.77 lakh crore in the April-November of the current fiscal year. 

This represents 61.79 per cent of the full-year Budget Estimates (BE) of direct tax collection for 2022-23 (April-March), the ministry said Monday.

"Direct tax collection net of refund stands at Rs 8.77 lakh crore as of November 30, which is 24.26 per cent higher than the net collection for the corresponding period last year," the ministry tweeted.

What were the budget estimates for the fiscal year?

The Budget estimated direct tax collection at Rs 14.20 lakh crore this fiscal year, higher than Rs 14.10 lakh crore collected last fiscal (2021-22). Tax on corporate and individual income makes up for direct taxes.

Why is this increase in tax collections important?

The increase is important as tax collections represent economic activity in any country. Moreover, higher tax collections will help the government keep the fiscal deficit in control.

But is there some sobering news in the details?

Yes, collections of indirect taxes are not really going up. The collection from the levy of tax on goods and services sold (GST) has flattened to around Rs 1.45-1.50 lakh crore per month.

Refunds amounting to Rs 2.15 lakh crore were issued between April 1 and November 30, which is about 67 per cent higher than the last year.

Could this mean tax collections will keep going up the next year as well?

Not necessarily. The world at large is staring at a recession and if that happens, then it will certainly also impact economic growth in India. If growth is singed, tax collections could be negatively impacted.