New tax changes to offset fuel tax cuts and overall revenue increase: Report

New tax changes to offset fuel tax cuts and overall revenue increase: Report

Tax changes to offset fuel tax cuts; promoting tax evasion beyond budget targets: Report


The fuel import tax and export tax changes will offset the fuel tax cuts and increase the overall tax collection towards this fiscal target to Rs 20.70 lakh crore, according to a report. report.

The budget pegged the overall tax collection at Rs 19.35 lakh crore. But ultimately, these changes in customs duties on some imports and growth in nominal GDP due to higher inflation should result in better tax revenue for the government as it increases by Rs 1.35. Rs compared to budget for fiscal year 23.

Following the May 21 tax cut on fuel, the government announced a series of fiscal policy measures to improve revenue and curb the fiscal deficit.

The government reduced the excise tax on petrol and diesel by Rs 8/liter and Rs 6/liter respectively on May 21, but on June 30, it increased the import tax on gold to 15%. from 10.75%; export duties of Rs 6 per liter, Rs 13 per liter and Rs 6 per liter respectively on gasoline, diesel and aviation turbine fuel.

It also applies the collected tax rate of Rs 23,250 on crude oil production.

Assuming a tax-to-GDP ratio of 7.5% (as forecasted in fiscal year 23 budget) and additional net income from these measures, tax revenue in fiscal year 23 could be 20 Rs .70 crore compared to Rs 19,35 lakh budgeted.

This means that the India Ratings report says additional tax revenue is Rs 1.35 lakh crore in fiscal year 23 over budget.

However, the agency expects non-tax revenue to come under pressure due to dividends and potentially lower profits from central public sector businesses. Non-tax revenue was budgeted at Rs 2.69 lakh crore in fiscal year 23, down from Rs 3.48 lakh crore in the previous fiscal year.

Also, rising inflation means higher nominal GDP, which in turn helps the government collect more taxes.
Likewise, companies that market oil in the public sector are suffering huge losses from the sale of gasoline and diesel.

With recovery rates below current levels, they could be compensated by Rs 47,000 crore this financial year.

The poor recovery will also hit the margins of crude oil producers such as Oil and Natural Gas Corporation and Oil India, resulting in lower government dividend payments. Another revenue shock was a lower-than-expected surplus transfer from the Reserve Bank.

The payment from the central bank is only 69.4% of what it was last year.

Overall, the agency expects non-tax revenue to be about 5% lower than the amount budgeted for fiscal year 23.

However, the agency does not believe that the government will have much difficulty in achieving its 23-year divestment revenue target of Rs 65,000 as it raised Rs 24,000 in April-May, 37% of its target. expenditure for fiscal year 23.

On the expenditure side, there will be an increase in fertilizer subsidies in FY 23 from Rs 1.05 lakh already budgeted for FY 23, down from Rs 1.53 lakh in FY 22.

However, global fertilizer prices increased 113.59% in Q1/FY23 compared to a 57.44% increase in the whole year FY22. Following this spike, the government increased the fertilizer subsidy by Rs 1.1 lakh to Rs 2.15 lakh crore in fiscal year 23.

The government has also increased the subsidy for LPG bottles to Rs 6,100 crore.

All these measures will increase revenue expenditure by Rs 1.16 lakh crore in fiscal year 23, bringing total spending to Rs 33.10 lakh crore from Rs 31.94 lakh crore budgeted , up from Rs 32.01 lakh crore in fiscal year 22.

The revised revenue and expenditure receipts indicate that the government will earn Rs 5,875 crore more in fiscal year 23 than it budgeted for. As a result, the revenue deficit will decrease by about 20 bps to 3.65% of GDP from the budgeted 3.84%.

On the other hand, if the government uses this reduction in revenue deficit to boost capital expenditure, the investment capital will increase to Rs 7.56 lakh from Rs 7.50 crore and the fiscal deficit will remain at the same level. 6.4 thousand rupees GDP.

In such a scenario, the Capex/GDP ratio would be at 2.8 lakh crore, lower than the budgeted 2.91% due to higher nominal GDP in fiscal year 23.

But if the government does not increase investment, the fiscal deficit to GDP ratio will be 30 bps lower to 6.1% from the 6.4% projected for fiscal year 23.

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