New Tax Changes To Offset Fuel Duty Cut And Boost Overall Collection: Report

New Tax Changes To Offset Fuel Duty Cut And Boost Overall Collection: Report

Tax changes to offset duty cut on fuel; boost tax mop-up over budget target: Report

Mumbai:

Changes in import duty and a windfall tax on fuel exports will offset duty cuts on fuels and increase overall tax collection over the budget target this fiscal to Rs 20.70 lakh crore, per a report.

The budget has pegged overall tax collection at Rs 19.35 lakh crore. But given, these changes in the customs duties on certain imports and the higher inflation-driven nominal GDP growth will lead to better tax revenue for the government to the tune of an additional Rs 1.35 lakh crore than budgeted for FY23.

After the May 21 tax cuts on fuels, the government has announced a slew of fiscal policy measures to improve its revenue and contain the fiscal deficit.

The government reduced excise duty on petrol and diesel by Rs 8/litre and Rs 6/litre, respectively, on May 21, but on June 30, it increased import duty on gold to 15 per cent from 10.75 per cent; imposed an export duty of Rs 6/litre, Rs 13/litre and Rs 6/litre on petrol, diesel and aviation turbine fuel, respectively.

It also slapped a windfall tax of Rs 23,250 tonne on crude oil production.

Assuming a tax to GDP ratio of 7.5 per cent (as forecast in the FY23 budget) and additional net revenue from these measures, the tax revenue in FY23 may come in at Rs 20.70 lakh crore against the budgeted Rs 19.35 lakh crore.

This means that the India Ratings report said that additional tax revenue of Rs 1.35 lakh crore in FY23 than budgeted.

The agency, however, expects non-tax revenue to be under pressure on the back of likely lower dividends and profits from central public sector enterprises. Non-tax revenue was budgeted at Rs 2.69 lakh crore in FY23, down from Rs 3.48 lakh crore in the previous fiscal.

Also, elevated inflation means higher nominal GDP, which will help the government collect more taxes.
Similarly, the public sector oil marketing companies are incurring huge losses on selling petrol and diesel.

At the current rate of under-recoveries, they may be compensated to Rs 47,000 crore this fiscal year.

Under-recoveries will also hit the margin of crude producers like Oil and Natural Gas Corporation and Oil India, resulting in a lower dividend payout to the government. Another revenue shocker was a lower-than-expected surplus transfer from the Reserve Bank.

The payout from the central bank was only 69.4 per cent of the last year’s.

Overall, the agency expects non-tax revenue to be lower, around 5 per cent, than the budgeted amount for FY23.

However, the agency does not believe that government will face much difficulty in achieving the FY23 divestment receipts target of Rs 65,000 crore as it has already collected Rs 24,000 crore in April-May, which is 37 per cent of the FY23 target.

On the expenditure front, there will be an increased outgo on the fertiliser subsidy in FY23 from the budgeted Rs 1.05 lakh crore for FY23, down from Rs 1.53 lakh crore in FY22.

However, global prices of fertilisers rose 113.59 per cent in Q1 of FY23 against a 57.44 per cent rise in the whole of FY22. Following this massive spike, the government increased fertiliser subsidy by Rs 1.1 lakh crore to Rs 2.15 lakh crore in FY23.

The government has also increased subsidies on LPG cylinders to the tune of Rs 6,100 crore.

All these measures will increase the revenue expenditure by Rs 1.16 lakh crore in FY23, taking the total expenditure to Rs 33.10 lakh crore against a budgeted Rs 31.94 lakh crore, up from Rs 32.01 lakh crore in FY22.

The revised revenue receipts and expenditure indicate that the government will earn more revenue of Rs 5,875 crore in FY23 than budgeted. As a result, the revenue deficit will come down by around 20 bps to 3.65 per cent of GDP than the budgeted 3.84 per cent.

On the other hand, if the government uses this reduction in revenue deficit to step up capital spending, the capex will go up to Rs 7.56 lakh crore from Rs 7.50 lakh crore, and the fiscal deficit will remain at 6.4 lakh crore of GDP.

In such a scenario, the Capex/GDP ratio will be at 2.8 lakh crore, lower than the budgeted 2.91 per cent due to the higher nominal GDP in FY23.

But if the government does not step up capex, the fiscal deficit to GDP ratio will be lower by 30 bps to 6.1 per cent as against the budgeted 6.4 per cent in FY23.

For all the latest business News Click Here 

Read original article here

Denial of responsibility! TechAI is an automatic aggregator around the global media. All the content are available free on Internet. We have just arranged it in one platform for educational purpose only. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials on our website, please contact us by email – [email protected]. The content will be deleted within 24 hours.