Govt expects to meet FY27 net tax revenue target of Rs 28.7 lakh crore despite excise shortfall

The Centre is likely to meet its budgeted net tax revenue target of Rs 28.7 lakh crore for the current financial year, with higher collections from direct taxes, goods and services tax (GST) and customs expected to compensate for a possible shortfall in excise duty collections, a senior government source said. "Budget tax targets are likely to be met this fiscal year," the source said, adding that a possible shortfall in excise duty collections could be offset by stronger receipts from other major tax heads. "There may be a shortfall in excise duty collections. Higher collections from direct taxes, GST and customs are expected to compensate for the losses," the sources said. The Union Budget has pegged gross tax revenue at Rs 44.04 lakh crore and net tax receipts at Rs 28.7 lakh crore for FY27. The government's assessment rests on the expectation that stronger revenue mobilisation across major tax categories will help cushion the impact of weaker excise duty receipts. Direct tax collections have shown a pickup in the current fiscal year. Net direct tax collections rose 18.3 percent year-on-year to around Rs 11.25 lakh crore as of October 10, according to government data reported by Moneycontrol. The latest collections included personal income tax receipts of Rs 5.98 lakh crore and corporate tax collections of Rs 4.94 lakh crore, while Securities Transaction Tax collections stood at Rs 30,630 crore. The latest growth marks an improvement over FY26, when direct tax collections rose 5 percent to Rs 23.39 lakh crore, falling short of the revised estimate of Rs 24.21 lakh crore. For FY27, the Centre has budgeted direct tax collections of Rs 26.97 lakh crore, implying a substantial increase over the previous year's actual receipts. The stronger growth in direct tax collections so far could support the government's assessment that the overall net tax revenue target remains achievable. However, collections will need to sustain their momentum through the remainder of the financial year to meet the annual target. GST collections have also provided a key source of support. Gross GST revenue rose 14.7 percent year-on-year to Rs 2.04 lakh crore in September, remaining above the Rs 2 lakh crore mark for the third consecutive month. Collections during April-September increased 11.6 percent to Rs 12.46 lakh crore. Customs collections are also expected to help offset the pressure on excise revenues, with stronger import-related tax receipts supporting the indirect tax mop-up. The performance of these tax heads will be important in determining whether the Centre can compensate for any revenue shortfall from excise duty. Excise duty remains a potential pressure point following changes in fuel taxation announced in March. Moneycontrol had earlier reported that cuts in petrol and diesel excise duties could result in a revenue loss of more than Rs 1 lakh crore in FY27, even after accounting for additional revenue from taxes on fuel exports. The broader revenue outlook is also important for the Centre's fiscal consolidation plans. The Union Budget has set a fiscal deficit target of 4.3 percent of GDP for FY27, while prioritising capital expenditure of Rs 12.22 lakh crore.