Increased tax revenue keeps India on track to becoming $5 trn economy: FinMin

The focus on capex in the recently announced Budget for the current fiscal year will boost manufacturing and tax revenue collections, thereby keeping India on track to becoming a $5 trillion economy, the finance ministry said on Thursday.

India's gross tax collections rose to ₹27.07 lakh crore ($356.82 billion) in 2021/22 financial year ending in March, surpassing the revised target by a wide margin.

"The central government's focus on making India a global economic powerhouse and the host of measures adopted towards this commitment has directly reflected in India's GDP growth in recent years. This has translated into increased revenue collection for the exchequer while keeping India well on the track towards achieving a $5 trillion economy...," the ministry said in a statement.

In February, Nirmala Sitharaman, India's finance minister had upwardly revised the tax receipts' target to ₹25.16 lakh crore rupees from earlier estimate of ₹22.17 lakh crore for the FY22.

Meanwhile, the direct tax collections stood at ₹14.10 lakh crore in the reporting year, which is ₹3.02 lakh crore more than budget estimate, Revenue Secretary Tarun Bajaj said.

Direct tax collections in FY22 grew 49%, while indirect tax collection rose 30%. In direct taxes, corporate tax collections were up by 56%, while personal income tax is up by 43%.

The ministry said apart from a brief setback owing to COVID-19, the government has maintained the nominal GDP growth above 10 per cent in recent years. GST, a simplified way of collecting indirect taxes, has been a revolutionary step propelling India’s GDP.

"With a big push to capex in the Union Budget of 2022-23, the coming years are going to see a surge in domestic manufacturing as well as growth in employment. These in turn will directly boost tax contribution to the exchequer," the ministry said.