In what amplified the worries over the government’s ability to stick to the fiscal consolidation path, direct tax collections till January 15 stood at Rs 7.3 lakh crore, down 5.2% from the year-ago period. There is no precedent of a contraction in direct tax growth at least in recent history.
Gross direct tax collections — after refunds but before devolution to states — for FY20 is budgeted to grow at 17.4% to Rs 13.35 lakh crore. Many analysts have pegged the total tax revenue shortfall (net) for the current fiscal at upwards of Rs 2.5 lakh crore. There are reports that the government might try to boost collections in March quarter by unveiling an amnesty dispute resolution scheme for direct taxes, similar to the one implemented for indirect taxes.
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A steep contraction in corporate tax collections is partly attributable to the slashing of rates in September but the economic slowdown has accentuated the fall. Personal income tax collection grew 6.5% till January 15, as against 23.3% budgeted.
The headline corporate tax rate was slashed to 22% from 30% earlier for regular firms while it was cut to 15% from 25% for new manufacturing units. The collection is further impacted by a slowing economy which is expected to grow 5% this fiscal.
The growth in taxes paid by corporates first entered the negative territory in November when it contracted by about 1% from a year-ago period. Total direct tax collection in this period, however, grew 1.6% due to PIT contribution.
Sources said another reason for low growth is the release of higher quantum of refunds in the first eight months of the current fiscal against the same period last year. The income tax department has processed refunds worth Rs 1.46 lakh crore till November 28, up 23% compared with the same period a year ago, a tax official said.
Source: Financial Express
