Government Finances Show Marked Improvement In HI, State Tax Revenue Exceeded Pre-COVID Levels

Government finances, both Central and State, have shown considerable resilience in the first half of the current fiscal, with tax increases beating expectations by a wide margin and spending remaining in line with budget estimates despite higher pandemic-related spending, said the December issue of the RBI bulletin.

The central bank economists’ paper also noted “a marked improvement in spending quality” for both the Center and the states, which bodes well for a sustained growth recovery.

The Center’s direct tax collection increased by 83.7% in the first six months of the year, led by income tax and corporate tax growth at 64.7% and 105.1%, respectively, the newspaper said. strong business performance of the company, the newspaper said.

The Center’s indirect tax collection also increased in the first half of the year, led by a more than 100% increase in customs tax collection and higher crude oil prices, and by improved trade activity and higher import demand.

The union excise tax collection also increased by 33.3% from FY21 and 79% from FY20 due to higher taxes levied in March and May 2020 to mobilize additional revenue as an emergency measure caused by the pandemic.

GST collection also increased in 6 months by 50.1% and 12.5% ​​respectively compared to FY21 and FY20.

GST revenue was impacted from May to June due to pandemic-related restrictions but recovered quickly thereafter, in line with the economic recovery and based on steps taken by tax authorities to prevent avoidance and reduce compliance burden.

November 2021 GST collection is the second highest so far at Rs 1.32 lakh, up 25.3%.

This has had about three-fifths of the Rs1 lakh budgeted GST revenues made between April and October.

The Center has also transferred the full amount of Rs 1.59 lakh crore to be issued to the states this financial year on a back-to-back loan basis in lieu of GST. Preloading was done to allow states to plan their spending efficiently.

Going forward, the overall government fiscal deficit, still eased in H1, allows for increased spending in H2 to support and sustain the recovery in growth, the report notes.

The budget is expected to consolidate fiscal deficits from 9.5% in FY21 to 6.8% in FY22. Countries also budget to consolidate their fiscal deficits. from 4.7% GSDP in FY21 to 3.7% in FY22.

The second wave in April-May this year appeared to be more severe in terms of loss of life, but the impact on economic activity was contained through local closures and also better adapted to live with virus, the bulletin said.

“Government finances show considerable resilience and resilience, and as a result, despite the additional spending burden imposed by the second wave, government spending has generally remained in line with budget estimates.

“The push in capital has resulted in a significant improvement in the quality of spending, a necessary condition for fiscal consolidation for growth over the medium term,” it said.

From a revenue perspective, tax collection by both the Center as well as the states beat expectations, with all major tax authorities recording strong growth in the first half of the year.

They reached pre-pandemic levels in H1 with states having collected 46.9% of their total revenue, higher than the corresponding figure over the past three years.

State spending was 37.8% of the budget target, which is generally in line with averages in pre-pandemic years. PTI BEN ABM ABM