India expects tax collection growth to continue despite surge in COVID-19 cases

The growth in India's tax collections will continue despite concerns that economic activity could fall because of a second wave of COVID-19 infections this month, a finance ministry official said on Tuesday.

 Some business leaders have expressed concerns over the lockdowns by many states after a surge in infections, fearing that it could hit consumer demand and sales as well as tax collections.

India's indirect tax receipts, mainly comprising customs and nationwide goods and services tax, in the financial year ending on March 31 increased more than 12% on year to 10.71 trillion rupees ($142 billion), M. Ajit Kumar, chairman of the Central Board of Indirect Taxes and Customs at the ministry told a virtual news briefing.

"This momentum is likely to continue in the coming year," he said, while ruling out much impact of the second wave of COVID infections. "We may do better than what we had achieved last April."

Federal net tax receipts, comprising corporate and individual taxes, have also risen to 9.45 trillion rupees for the 2020/21 fiscal year, surpassing a revised target.

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Most economic sectors have bounced back after a difficult phase, Kumar said, adding metals, white goods, automobiles, cement, chemicals, electronics had shown growth.

"This is the sign of green shoots in the economy."

However, Devendra Pant, chief economist at India Ratings, pointed to an increase in tax receipts for gasoline and diesel, after fuel taxes were raised last year, as the main driver for the overall gain in tax collections.

Goods and services tax receipts were down 8% in the 2020/21 fiscal year compared to the previous period because of a reduction in economic activities after the COVID-19 outbreak, the Central Board said.

India reported 161,736 new coronavirus infections on Tuesday, the most globally, for a total of 13.69 million cases.

India's economy is projected to grow at around 11% in the financial year that started on April 1, after an estimated contraction of about 8% in the previous period.

Reuters