The Central Government is preparing for a marginal shortfall in tax collections for the current financial year as recent GST rate cuts, income-tax relief measures and weak global demand weigh on revenue inflows, especially from corporates, senior officials said. Despite this, the Centre remains confident of meeting its 2025-26 fiscal deficit target of 4.4% of GDP, supported by stronger non-tax revenue and expenditure savings across flagship schemes.
Officials said a clearer picture will emerge after December 15, once third-quarter advance tax payments and post-festive GST trends are fully assessed. "The exact quantum of the shortfall will be known only after analysing the December advance tax data and GST revenues once the festive boost subsides," one official said.
Direct Tax Collections Rise 7% So Far, But Behind Budget Growth Target
Between April 1 and November 10, net direct tax collection rose nearly 7% year-on-year to Rs 12.92 lakh crore, while refunds dipped 18% to about Rs 2.42 lakh crore. The Centre has budgeted a 13% rise in direct taxes for 2025-26, targeting Rs 25.2 lakh crore.
CBDT chairman Ravi Agarwal recently said the government remains optimistic about achieving its budget targets and expects collections to strengthen by December, with revised estimates hinging on Q3 advance tax numbers.
GST Cuts Boost Festive Demand but May Trim Post-Festive Tax Mop-Up
The sweeping GST rate cuts on 99% of items, effective September 22, triggered strong festive-season buying across categories such as automobiles, consumer electronics and household durables. While this provided a temporary lift to consumption, experts caution that GST collections could soften once festive demand tapers off.
Until October, net GST collections in the current fiscal reached Rs 12.07 lakh crore, which is 7.1% higher than last year but below the budgeted 11% growth. Analysts say easing inflation has also contributed to the slower-than-expected pickup in GST revenues.
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