Updated: January 22, 2020 5:02:55 am
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 per cent 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 per cent 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 the March quarter by unveiling an amnesty dispute resolution scheme for direct taxes, similar to the one implemented for indirect taxes.
A steep contraction in corporate tax collections is partly attributable to the slashing of rates in September.
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However, the economic slowdown has accentuated the fall.
Personal income tax collection grew 6.5 per cent till January 15, as against 23.3 per cent budgeted.
The headline corporate tax rate was slashed to 22 per cent from 30 per cent earlier for regular firms, while it was cut to 15 per cent from 25 per cent for new manufacturing units.
The collection is further impacted by a slowing economy which is expected to grow 5 per cent this financial copy.
The growth in taxes paid by corporates first entered the negative territory in November 2019 when it contracted by about 1 per cent from a year-ago period.
Total direct tax collection in this period, however, grew 1.6 per cent due to personal income tax contribution.
Sources said another reason for low growth is the release of higher quantum of refunds in the first eight months of FY20 against the year-ago period.
The Income Tax Department has processed refunds worth Rs 1.46 lakh crore till November 28, up 23 per cent compared with the year ago, a tax official said. —FE
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