<p>The Controller General of Accounts (CGA) regularly compiles government revenues, expenditures and deficits data and releases it every month. The September fiscal data were released on October 30. The Government of India budgeted the Gross Tax Revenue (GTR) – an aggregate of all tax receipts – at Rs 38.40 trillion for 2024-2025, estimating a growth of Rs 4.79 trillion (14.26%) over the 2023-2024 Budget estimates of Rs 33.61 trillion (11.72% with respect to the 2023-2024 revised estimates of Rs 34.72 trillion). The CGA data for the first six months indicates that the GTR grew by 12.02% (Rs 18.14 trillion against Rs 16.19 trillion in 2023-2024), which is lower than the growth which was projected with reference to the 2023-2024 Budget estimates but slightly higher with reference to the revised estimates.</p><p>However, the six-month overall GTR performance does hide a big difference in terms of the performance of the first and second quarters of 2024-2025. While the growth in GTR was as high as 23.65% in the first quarter (Rs 8.31 trillion against the Rs 6.72 trillion in the first quarter – Q1 – of 2023-2024), the growth tanked to 3.76% in the second quarter (Rs 9.83 trillion against Rs 9.47 trillion in Q2 2023-2024). This is alarming. How is the granular tax performance? And what does it signal for the rest of the year?</p><p>Direct taxes, Personal Income Taxes (PIT) particularly, have been holding the high tax growth flag for quite some time. After an eye-popping growth of nearly 50% in 2021-2022, the direct taxes (corporation taxes and PIT together) recorded a high growth of 17.9% and 17.6% in 2022-2023 and 2023-2024, respectively. In Q1 2024-2025 also, direct taxes recorded an extraordinary growth of 40% (Rs 4.62 trillion against Rs 3.30 trillion in Q1 2023-2024). In Q2, however, the fortunes did reverse. The direct tax receipts in Q2 2024-2025 at Rs 5.64 trillion have witnessed an unbelievable growth of (-)1.53% (Q2 2023-2024 receipts Rs 5.73 trillion). This is nothing short of a disaster.</p>.Markets, led by IT stocks, cheer Donald Trump victory.<p>Both corporation tax and PIT performed badly in the quarter. Corporation taxes grew by 26.19% in Q1 2024-2025 (Rs 1.75 trillion against Rs 1.39 trillion in Q1 2023-2024). In Q2, despite a stable performance in September, the corporation tax receipts were only Rs 2.87 trillion (against Rs 3.13 trillion in Q2 2023-2024), recording a growth of (-)8.33% – thereby bringing the performance during the first half (H1) of 2024-2025 down to a tepid 2.27%.</p><p>In Q1, the PIT recorded a hefty growth of 50% (Rs 2.87 trillion against Rs 1.92 trillion in Q1 2023-2024). In Q2, the PIT growth slumped to 6.65% (Rs 2.77 trillion against Rs 2.60 trillion in Q2 2023-2024). While the half year 2024-2025 PIT growth can still be seen as healthy at 25%, the big decline in Q2 is quite ominous.</p><p>Indirect tax receipts, budgeted at Rs 16.33 trillion for 2024-2025, were projected to grow at 9.45% over the revised estimates for 2023-2024 (Rs 14.92 trillion). The receipts from three major indirect taxes (central GST, customs, and excise duty) recorded a growth of 8.53% in the first half (Rs 6.83 trillion against Rs 6.29 trillion in H1 2023-2024); this is about 1% lower than the projected growth.</p>.<p>In Q1 2024-2025, major indirect taxes grew by only 6.3% (Rs 3.27 trillion against Rs 3.07 trillion in Q1 2023-2024). Their performance was better in Q2 at 10.66% (Rs 3.56 trillion against Rs 3.22 trillion in Q2 2023-2024). In terms of individual taxes, in H1 2024-2025, the CGST growth was the highest at 10.84% (Rs 4.41 trillion against Rs 3.98 trillion in 2023-2024). Customs duties registered a lower growth of 6.38% while the excise duties were at the lowest growth of 2.97%. In all, all the major indirect taxes registered an average performance.</p><p>By the end of the first half, the government incurred total expenditures of Rs 21.11 trillion, (-)0.36% lower than the total expenditure of Rs 21.19 trillion in H1 2023-2024. Capital expenditures witnessed a sharp deceleration at 15.42% in H1 2024-2025 (Rs 4.15 trillion against Rs 4.19 trillion in 2023-2024). Capital expenditures were lower than the last year Q1 as well as in August and September 2024. The under-performance in expenditure resulted in a benign fiscal deficit, about one-third less than in the first half of 2023-2024 (Rs 4.75 trillion against Rs 7.02 trillion), despite a weaker growth of tax revenues.</p>.<p><strong>Difficult times ahead?</strong></p><p>Corporate earnings for Q2 2024-2025 that were announced in October indicated a lower growth in net profits (in low single digits), which explains the lower corporation tax growth in H1. There are indicators to suggest that there may not be any turnaround anytime soon.</p><p>The PITs witnessed superlative growth, partly on account of spectacular capital gains made on the stock exchanges. October brought the most serious reversal in runaway stock prices not witnessed since COVID-19 impacted the sale-off in March 2020. The downward trend seems more likely to linger on, resulting in the PIT not delivering an outstanding performance this year.</p><p>The GST data, including for October released on November 1, suggests that the GST growth is likely to remain in the single digits (even when the nominal GDP growth exceeds 10%). Overall, it is increasingly apparent that FY 2024-2025 is likely to turn out a humbling tax growth performance, which will obviously have serious implications for capital expenditure and the overall Budget for 2025-2026 as well.</p><p><em>(The writer is a former Finance and Economic Affairs Secretary)</em></p>
<p>The Controller General of Accounts (CGA) regularly compiles government revenues, expenditures and deficits data and releases it every month. The September fiscal data were released on October 30. The Government of India budgeted the Gross Tax Revenue (GTR) – an aggregate of all tax receipts – at Rs 38.40 trillion for 2024-2025, estimating a growth of Rs 4.79 trillion (14.26%) over the 2023-2024 Budget estimates of Rs 33.61 trillion (11.72% with respect to the 2023-2024 revised estimates of Rs 34.72 trillion). The CGA data for the first six months indicates that the GTR grew by 12.02% (Rs 18.14 trillion against Rs 16.19 trillion in 2023-2024), which is lower than the growth which was projected with reference to the 2023-2024 Budget estimates but slightly higher with reference to the revised estimates.</p><p>However, the six-month overall GTR performance does hide a big difference in terms of the performance of the first and second quarters of 2024-2025. While the growth in GTR was as high as 23.65% in the first quarter (Rs 8.31 trillion against the Rs 6.72 trillion in the first quarter – Q1 – of 2023-2024), the growth tanked to 3.76% in the second quarter (Rs 9.83 trillion against Rs 9.47 trillion in Q2 2023-2024). This is alarming. How is the granular tax performance? And what does it signal for the rest of the year?</p><p>Direct taxes, Personal Income Taxes (PIT) particularly, have been holding the high tax growth flag for quite some time. After an eye-popping growth of nearly 50% in 2021-2022, the direct taxes (corporation taxes and PIT together) recorded a high growth of 17.9% and 17.6% in 2022-2023 and 2023-2024, respectively. In Q1 2024-2025 also, direct taxes recorded an extraordinary growth of 40% (Rs 4.62 trillion against Rs 3.30 trillion in Q1 2023-2024). In Q2, however, the fortunes did reverse. The direct tax receipts in Q2 2024-2025 at Rs 5.64 trillion have witnessed an unbelievable growth of (-)1.53% (Q2 2023-2024 receipts Rs 5.73 trillion). This is nothing short of a disaster.</p>.Markets, led by IT stocks, cheer Donald Trump victory.<p>Both corporation tax and PIT performed badly in the quarter. Corporation taxes grew by 26.19% in Q1 2024-2025 (Rs 1.75 trillion against Rs 1.39 trillion in Q1 2023-2024). In Q2, despite a stable performance in September, the corporation tax receipts were only Rs 2.87 trillion (against Rs 3.13 trillion in Q2 2023-2024), recording a growth of (-)8.33% – thereby bringing the performance during the first half (H1) of 2024-2025 down to a tepid 2.27%.</p><p>In Q1, the PIT recorded a hefty growth of 50% (Rs 2.87 trillion against Rs 1.92 trillion in Q1 2023-2024). In Q2, the PIT growth slumped to 6.65% (Rs 2.77 trillion against Rs 2.60 trillion in Q2 2023-2024). While the half year 2024-2025 PIT growth can still be seen as healthy at 25%, the big decline in Q2 is quite ominous.</p><p>Indirect tax receipts, budgeted at Rs 16.33 trillion for 2024-2025, were projected to grow at 9.45% over the revised estimates for 2023-2024 (Rs 14.92 trillion). The receipts from three major indirect taxes (central GST, customs, and excise duty) recorded a growth of 8.53% in the first half (Rs 6.83 trillion against Rs 6.29 trillion in H1 2023-2024); this is about 1% lower than the projected growth.</p>.<p>In Q1 2024-2025, major indirect taxes grew by only 6.3% (Rs 3.27 trillion against Rs 3.07 trillion in Q1 2023-2024). Their performance was better in Q2 at 10.66% (Rs 3.56 trillion against Rs 3.22 trillion in Q2 2023-2024). In terms of individual taxes, in H1 2024-2025, the CGST growth was the highest at 10.84% (Rs 4.41 trillion against Rs 3.98 trillion in 2023-2024). Customs duties registered a lower growth of 6.38% while the excise duties were at the lowest growth of 2.97%. In all, all the major indirect taxes registered an average performance.</p><p>By the end of the first half, the government incurred total expenditures of Rs 21.11 trillion, (-)0.36% lower than the total expenditure of Rs 21.19 trillion in H1 2023-2024. Capital expenditures witnessed a sharp deceleration at 15.42% in H1 2024-2025 (Rs 4.15 trillion against Rs 4.19 trillion in 2023-2024). Capital expenditures were lower than the last year Q1 as well as in August and September 2024. The under-performance in expenditure resulted in a benign fiscal deficit, about one-third less than in the first half of 2023-2024 (Rs 4.75 trillion against Rs 7.02 trillion), despite a weaker growth of tax revenues.</p>.<p><strong>Difficult times ahead?</strong></p><p>Corporate earnings for Q2 2024-2025 that were announced in October indicated a lower growth in net profits (in low single digits), which explains the lower corporation tax growth in H1. There are indicators to suggest that there may not be any turnaround anytime soon.</p><p>The PITs witnessed superlative growth, partly on account of spectacular capital gains made on the stock exchanges. October brought the most serious reversal in runaway stock prices not witnessed since COVID-19 impacted the sale-off in March 2020. The downward trend seems more likely to linger on, resulting in the PIT not delivering an outstanding performance this year.</p><p>The GST data, including for October released on November 1, suggests that the GST growth is likely to remain in the single digits (even when the nominal GDP growth exceeds 10%). Overall, it is increasingly apparent that FY 2024-2025 is likely to turn out a humbling tax growth performance, which will obviously have serious implications for capital expenditure and the overall Budget for 2025-2026 as well.</p><p><em>(The writer is a former Finance and Economic Affairs Secretary)</em></p>