Buoyant Tax Collections Cushion Government On Fiscal Front, ITR Reforms Likely Next Year

On the Goods and Services Tax (GST) side, the GST Council, comprising finance ministers from states and the Centre, has set the ball rolling on rationalisation of tax rates and the merging of slabs as the indirect tax regime completes its fifth year.

The end of the GST regime after half a decade was significant because the compensation paid to states for revenue loss ended this year, as did the term of the National Anti-Profiteering Authority, whose job was transferred to anti-monopoly watchdog the Competition Commission of India.

GST collections, which are a barometer of the economy’s performance, have been showing improving signs and are stabilising around Rs 1.4 lakh crore on the back of a vibrant economy.

As the government stepped up compliance checks and data sharing among departments, the tax revenues have improved over the year, and this fiscal is likely to exceed the budget target of Rs 27.50 lakh crore by about Rs 4 lakh crore, helping the government to keep its fiscal deficit in 2022–23 within the budgeted level.

Keeping a hawk’s eye on the areas that can garner more taxes, the government this year brought in a 30% tax on transactions in virtual digital assets, or cryptocurrencies. Also, to establish the money trail, a 1% tax deducted at source, or TDS, has been brought in. This tax has somewhat dampened investor sentiment in highly risky crypto investments.

Also, the ‘windfall profit tax’ was introduced to tax ‘above-average profits’ earned by the domestic oil and gas companies after crude prices skyrocketed following the Russia-Ukraine war. To tax the above-normal profits earned by upstream oil companies, India imposed a windfall tax on oil producers in July 2022 and reviews it every fortnight.

Besides, the concept of an updated return has been introduced this year to enable taxpayers to disclose omitted income and correct mistakes made in income tax returns within a two-year window. An additional 25% on the due tax and interest would have to be paid if the updated ITR is filed within 12 months, while the rate will go up to 50% if it is filed after 12 months but before 24 months from the end of the relevant Assessment Year.