The Budget for FY 24 is likely to factor in a lower indirect tax collection growth for FY 24. According to credit rating agency, ICRA, indirect taxes are expected to grow year-on-year (Y-o-Y) by 8% in FY 24.
Indirect taxes are taxes other than income and corporate taxes. These taxes include GST, customs duty, excise duty etc. One reason why indirect taxes are expected to register a slower growth is that economic conditions may deteriorate at the domestic and global level in FY 24. This will result in lower collections of custom duties.
Custom duties are taxes imposed on exports and imports. A global economic slowdown will lower demand for India’s exports. Government imposes export duties on a number of export items. Lower exports will result in lower collection of export duties. High inflation and lower economic growth at the domestic level will lower the real income of Indians further. This will lower the demand for imported items in India. Indian Government imposes import duties on a large number of imported items. Lower import demand will result in lower collection of custom duties for the government.
Excise duty is still levied on petrol, diesel and alcohol. Other items are now covered under the GST regime. 2023 is the last year before the general elections. The General Elections will be held in 2024. Therefore, the government is more likely to cut down excise duty on petrol and diesel further. This will also lower indirect tax collection of the government.
GST collections are likely to go up further. This will happen mainly on account of improvement in efficiency of tax collection. Increased activity in some Services will also contribute to increase in GST collection.
