Meeting Budget Estimates (BE) related to collection of Corporate Tax and Union Excise Duty would be a tough task, latest trends show. Revised number for both the levies will be provided in the Union Budget for Fiscal Year 2025-26 to be presented on February 1.
Data from Income Tax Department shows actual growth rate in net Corporate Tax (CT) has been around 8.6 per cent as against targeted growth rate of 10.5 per cent (FY25’s Budget Estimate of ₹10.20 lakh crore as against FY 24’s Revised Estimate of ₹9.23 lakh crore). Though the department has not given any specific reason for lower actual growth than required growth rate, it appears that slowdown in urban demand, lower Government spending on account of model code of conduct in April-June quarter and monsoon-related disruptions in July-September quarter impacted corporate profitability which, in turn, had some effect on CT.
Meanwhile, rating and economic research agency ICRA expects sequential revenue growth for India Inc in Q3 (October-March) FY2025, led by improved rural demand and uptick in Government spending and additionally supported by the festive season. However, headwinds such as uneven urban demand and evolving global uncertainties could weigh on growth in H2 (October-March) FY2025. “ICRA expects the operating profit margin (OPM) for India Inc to improve in the coming quarters,” the agency said in recent report. Still, considering the surging required rate in remaining months of FY 25, it would be challenging to achieve budget estimates of ₹10.20 lakh crore for CT in current fiscal year.
Last fiscal, CT collection missed BE/RE. BE for FY 24 was ₹9.23 lakh crore and it was same in RE. However, actual collection was little over ₹9.11 lakh crore.
Union Excise Duty
Meanwhile, data from Controller General of Accounts (CGA) showed collection from Union Excise Duty during April-November recorded de-growth, albeit marginally. Officials said impact of 2022 cut in central rate is still there. At the same time, since Centre levies Excise Duty on specific rate basis (a fixed amount is charged per litre of petrol and diesel, regardless of change in their cost price), higher import parity prices of petrol and diesel also did not have any impact on the collection.
Now in order to achieve BE, average monthly collection during December-March period should be in around ₹36000 crore as against ₹21000 crore during April-November period. Although consumption of petrol and diesel has picked up, it that might not be enough to help achieving required average. CGA data also showed that actual collection in FY24 was over ₹3.05 lakh crore as against BE of ₹3.39 lakh crore and RE of ₹3.03 lakh crore.
Meanwhile, officials said lower than BE in CT in Union Excise duty will not have any impact on overall fiscal deficit. They said collection from non-corporate tax, securities transaction tax and GST along with non-tax revenue have been better. At the same time, expenditure and especially Capital Expenditure has been low.
