Indias tax collection is showing unprecedented buoyancy. All tax heads, except perhaps the excise duty, are expected to outdo the Budget estimates (BE). Last budget estimated gross tax collection this fiscal to touch Rs 4.42 lakh crore, up 19.5% over Rs 3.70 lakh crore collected last year. As opposed to this, direct tax collection was up 41.8% at Rs.1,44,286 crore, at December-end, as against the targeted 24%.

Corporate taxes were up by 51.8% at Rs 92,463 crore while income tax (including the fringe benefit tax, securities transaction tax and the banking cash transaction tax) was up by 27.1% at Rs.51,565 crore. The projected growth in corporate tax this fiscal was 29% while income tax collection including FBT, STT and BCTT was estimated to increase 16.6%.

Similarly, Customs collection during April-December stood at Rs 63,952 crore, up 34% over the corresponding period last year while just 20% growth was projected in last Budget. Service tax revenue has outpaced even the ambitious target of 50% set in last Budget.

Indicating that tax on services could emerge as the single largest source of tax revenue for the Centre sooner than expected, the collection till November stood at Rs 21,779 crore, up 65% over the corresponding period last year. Significantly, the tax on manufacturing (excise duty), which has conventionally excelled in contributing to the exchequer, would lose its pre-eminent slot this fiscal to corporate tax.

While this was projected in the last Budget itself given the signs of plateauing of the excise revenue evident during the last 2-3 years, there could well be much larger difference between the size of corporation tax and excise revenues by the end of the fiscal.

Excise revenue in April-December stood at Rs 80,249 crore, up 6.3% over the year-ago period. The target for the whole fiscal was 6.25%. But there is the possibility of a shortfall on this front, as the moving annual target is slightly higher. According to the Central Board of Excise & Customs, to achieve the BE on the excise front, the growth required in the remaining part of the fiscal would be 6.9%.

This is even the customs collection target would be met even with a negative growth (-25.2%) during the last quarter of the fiscal. That is, the required growth for achieving budget estimates of customs, excise are 25.2% and 6.9%, respectively, and the combined growth for achieving BE in case of these two indirect taxes is, again, in the negative (-3.8%). As per this trend, service tax and corporation tax would emerge as the largest tax revenue resources of the government in the medium term.

With the plan to add more services to the tax net both at the federal and state levels and the comparatively more efficient auditing in this area, the present buoyancy would only become more pulsing in the next few years. Excise collection could pick up too, a few years from now, if the efforts to give a boost to manufacturing bear fruit.

Of course, once the goods and services tax is introduced with input tax credit, estimates of separate heads will become less relevant.

An important feature of the tax revenue trends is the higher revenue from new imposts like STT and FBT. STT collection till December stood at Rs.3,226 crore, up 87.8% while FBT registered a healthy growth of 65.2% and stood at Rs.2,933 crore.