Gross direct tax collection declined 31 per cent to Rs 1,37,825 crore till June 15 of the current fiscal as advance tax mop-up plunged 76 per cent amid the coronavirus pandemic, an official said on Tuesday.
The Budget for 2020-21 has estimated a 12 per cent increase in gross tax collections at Rs 24.23 lakh crore, from Rs 21.63 lakh crore in FY20. The collection was lower in the last fiscal due to corporate tax rate cuts.
The budget target for direct taxes is Rs 13.19 lakh crore, which is 28 per cent higher than Rs 10.28 lakh crore in FY20, as the government expects a good response to the tax dispute settlement scheme ‘Vivad se Vishwas’.
“Total advance collection fell a massive 76.05 per cent to Rs 11,714 crore so far in the June quarter from Rs 48,917 crore in the corresponding three-months in FY20,” an income tax official told PTI.
According to the official, advance corporate tax collection plummeted 79 per cent to Rs 8,286 crore in the first quarter of the current fiscal from Rs 39,405 crore in the June 2019 quarter. The advance personal income tax collection declined 64 per cent to Rs 3,428 crore from Rs 9,512 crore in the year-ago period, the official added.
This has pulled down “gross direct tax collection by a full 31 per cent to Rs 1,37,825 crore in the first quarter of FY21, down from Rs 1,99,755 crore in the June 2019 quarter,” the official said.
The official also said after refunds, the total net direct tax collection is only Rs 92,681 crore so far this fiscal, a decline of 32 per cent from Rs 1,36,941 crore in the year-ago period.
So far in the June quarter, the department has refunded Rs 45,143 crore. It is 28 per cent lower than Rs 62,813 crore that was refunded in the corresponding quarter last fiscal.
The last day to pay advance taxes was June 15 and assessees falling under the ambit of advance tax payment are required to pay 15 per cent of the evaluated tax liability in the first quarter, 25 per cent each in the next two quarters and the remaining 35 per cent in the fourth quarter.
Economists said the numbers are not surprising given the shape of the economy and that the government will miss the budgeted tax numbers given the impact of the pandemic-driven lockdown that has crippled the economy.
“The 31 per cent decline in gross direct tax collection and 32 per cent plunge in net collections is on the expected lines. This is pointing towards weak economic activities. Corporate tax collection is also impacted by cut in corporate tax rate in September 2019.
“Based on the evolving situation on the economic growth front in FY21, the probability of touching even last year’s collection is low,” Devendra Kumar Pant, the chief economist at India Rating said.
Echoing similar views, Aditi Nayar, the chief economist at rating agency Icra, said the extent of contraction in net direct tax collection is in line with the de-growth that is expected in the non-agricultural portion of the economy in the first quarter due to the lockdown.
She said that for FY21 as a whole, net tax revenue is likely to fall short by Rs 3.9 lakh crore of the budget estimate.
The expected shortfall, she said, is based on the anticipated compression in consumption and income levels following the pandemic, the gain to the government from the hikes in excise duty on fuels, and adjusting for lower-than-budgeted central tax devolution to the states.
During the first two months of the June quarter, a nationwide lockdown was in place to control the spread of the coronavirus pandemic and it had also disrupted around 80 per cent of the economic activities in the country.
Even though the lockdown has been lifted considerably from June 1, the economy is yet to crawl back to normalcy.
It can be noted that advance tax mop-up had surged 171 per cent in the first quarter of the last fiscal to Rs 17,174 crore. It was mainly on account of an increase of 133 per cent in mop-up from the Mumbai region that contributes more than a third of the total tax revenue.