Tax collections moderating?

The rise in personal income tax collections is encouraging, but sustaining it may be challenging

- R Kavita Rao

A recent press release on direct tax collections up to June 19 suggests a moderation in collections. Net collections are reported to be 1.39 per cent lower than those in the previous financial year, attributed to a decline in corporation tax collections. Is this a short-term fluctuation, or are there some other factors at play? Looking at the annual growth in revenue collections for the three major taxes, corporation income tax (CIT), non-corporation income tax (referred to as PIT) and central goods and services tax (CGST), there is a clear moderation in revenues from CIT and CGST.

CIT growth fell from 15 per cent in 2022-23 to 8 per cent in 2024-25, and CGST from 21 per cent to 10 per cent during the same period. The performance of PIT has been comparatively better—20 per cent and 17 per cent, respectively.

Quarterly tax-to-GDP ratios echo these differences. The chart shows the ratio of quarterly tax collections (as reported in the Controller General of Accounts' monthly report) as a percentage of quarterly GDP estimates for the period since 2018-19. From this figure, it is clear that corporation tax collections are volatile, fluctuating around 3 per cent. The PIT shows a clear upward trend with some volatility or seasonal fluctuations. In comparison, revenues from Central GST show a modest increase, with a clear moderation in performance in the last few quarters.