Direct tax collection in FY22 grew 49%, indirect tax collection 30%; Revenues Exceeds byRs. 5 Lakh Crore

The tax collection in the Union Budget for 2021-22 was predicted at 22.17 lakh crore, up from 19 lakh crore in the revised estimates, representing a 17 percent increase. While the first COVID wave faded in India, the Union Budget was presented on February 1, 2021, when the world was confronting repeated waves.

In comparison to the Union Budget predictions of 22.17 lakh crore, pre-actual revenue collections are 27.07 lakh crore, about 5 lakh crore higher than the budget estimates. This represents a 34 percent increase over last year’s revenue collection of 20.27 lakh crore, driven by a 49 percent increase indirect taxes and a 20 percent increase in indirect taxes. Rapid economic recovery following consecutive waves of COVID, aided by one of the world’s largest government-run immunization programs, has fueled this revenue rise. It also indicates a strong economic rebound. These initiatives were bolstered by increased tax compliance measures. Various efforts were made by tax administration on both direct and indirect taxes to employ technology and artificial intelligence to urge higher compliance.

With direct tax to GDP ratios of 6.1 percent and indirect tax to GDP ratios of 5.6 percent, 2021-22 has the highest tax-to-GDP ratio of 11.7 percent. Tax buoyancy (a measure of tax revenue growth relative to GDP growth) is at 1.9, with direct taxes accounting for 2.8 and indirect taxes accounting for 1.1. The direct-to-indirect tax ratio increased from 0.9 in 2020-21 to 1.1 in 2021-22.

The gross corporate taxes collected in 2021-22 were 8.6 lakh crore, up from 6.5 lakh crore the previous year, demonstrating that the new simplified tax regime with low rates and no exclusions has delivered on its promise. The Income Tax Department issued refunds totaling 2.24 lakh core during the year. The focus over the previous two years has been to clear the backlog of refunds in order to get liquidity into the hands of enterprises. 2.4 crore refunds were issued during the year, including 2.01 crore for the fiscal year 2021-22, for which returns were filed till March 31, 2021.

Because of the speedier processing of returns, this was achievable. In the years 2021-22, 22.4 percent of returns were completed the same day, and roughly 75 percent were handled in less than a month. During 2021-22, the average processing time for returns was 26 days. 7.14 crore returns were filed this year, up from 6.97 crore the previous year.

Despite two waves of the COVID-19 epidemic, GST has grown at an outstanding rate between 2021 and 2022. Revenues from the Central Goods and Services Tax (CGST) grew from 4.6 lakh crore last year to 5.9 lakh crore in 2021-22. In 2021-22, the average monthly gross GST revenue was 1.233 lakh crore, up from 94,734 crore in 2020-21 and 1.011 lakh crore in 2019-20.

This indicates that the economy is once again on the mend. This has been bolstered by a variety of compliance-related initiatives. The GSTR-3B filing rate increased from 74 percent in September 2020 to 87 percent in February 2022 (a percentage of the previous month’s returns filed till the end of the month). The GSTR-1 filing rate has increased dramatically from 54% in September 2020 to 82 percent in February 2022. This also demonstrates that the gap between GSTR-3B and GSTR-1 filing has closed to the point of eradication. This demonstrates that the GST ecosystem has valued the invoice-based discipline in GST, which helps not only GST revenues but also adds to general economic formalization.

The value of e-way bills issued each month has increased from 16.9 lakh crore in January 2021 to 25.7 lakh crore in March 2022, indicating that the economy is improving.

Customs tax is expected to increase by 48 percent between 2021 and 2022. Through extensive discussions and crowdsourcing, the government has completed a comprehensive assessment and rationalization of the Customs tariff structure during the previous two years, rationalizing many exclusions and simplifying the tariff structure.

The economy is predicted to continue to recover, and government tax revenues are expected to rise.