Net Tax Revenues Decline In H1 Against Double-Digit Growth Estimate For The Year

Net tax revenue at Rs 12.3 lakh crore was down by 2.8 per cent in the first half of the year against the same period last year. The government has estimated 13.5 per cent growth for the full year. Meanwhile, gross tax collections at Rs 18.7 lakh crore rose by just 2.8 per cent in H1 FY26, much lower compared to the budgeted annual growth of 12.5 per cent, as per the data of CareEdge.

Both direct and indirect tax collections recorded a slowdown. Direct taxes grew by 3.1 per cent against estimated growth of 16.1 per cent and indirect taxes by 2.8 per cent against 10.9 per cent.

Despite recording double-digit growth in the last two months, income tax collections grew by just 4.7 per cent, below the budgeted annual growth of 21.6 per cent. Rationalisation of income tax slabs announced in the last Budget may have weighed on the performance of income tax collections so far this year, finds Care. In the case of corporate tax, the growth was just 1.1 per cent against 9.7 per cent projected by the government for the full year.

In indirect taxes, GST grew by 3.2 per cent against estimated 14.2 per cent and Customs duties declined 5.2 per cent against the projected growth of 3.1 per cent. However, union excise duties alone grew better than the projections at 8.1 per cent against 5.6 per cent growth estimated for the year.

“Lower nominal GDP growth might weigh on the tax buoyancy, thereby constraining the growth in tax collections. Furthermore, the net impact of GST rationalisation on the government’s tax revenue remains a key watch out for the remainder of the fiscal year,” the report said.

While tax collections remained subdued, the Centre’s non-tax revenues have been better-than-anticipated, buoyed by higher-than-budgeted dividend transfer from the RBI. On the spending front, capex remained healthy, exceeding the full-year targeted growth, while some rationalisation was seen in terms of the revenue expenditure.

Overall, higher-than-anticipated support from non-tax revenues and some rationalisation in revenue expenditure helped contain the fiscal deficit at Rs 5.7 lakh crore in H1 FY26. Fiscal deficit is at 36.5 per cent of the budget estimate, higher than 29.4 per cent seen in H1 last year, but broadly in line with the levels seen in the earlier years.