Advance tax collection
after the second instalment stood at Rs 2.2 trillion. The gross direct tax collection
has touched Rs 5.5 trillion as against the full-year target of Rs 13.35 trillion.
Within the advance tax collection, corporation tax mop-up grew by 6.5 per cent and personal income tax by 3.5 per cent.
“The revenue situation remains grim on account of the economy expanding slower than expected and key industries being impacted. If the situation does not improve, meeting the collection target will be impossible,” said a government official.
India’s gross domestic product (GDP) growth plummeted to a 25-quarter low of 5 per cent in the first quarter of FY20.
The tax buoyancy estimated this year at 1.44 is higher than 1.21 achieved last year. In simple terms, it means if nominal GDP expands by 10 per cent, direct tax collection
will grow by 14.4 per cent, which appears near impossible in the current situation. Nominal GDP grew by just 8 per cent in the first quarter as against 12 per cent budgeted for FY20. Several institutions, including the International Monetary Fund (IMF) and the Reserve Bank of India (RBI), have cut India’s growth forecast.
“Broad sentiment suggests that the actual economic growth may be lower, somewhere around 10 per cent. This will mean the direct tax collection
will be somewhere around 12-13 per cent,” said another official.
About 45 per cent of the direct tax revenue collection
comes from advance tax, 35 per cent from TDS (tax deduction at source), 10 per cent from self-assessment, and 10 per cent from recovery. Advance tax means paying tax as and when the money is earned, rather than waiting for the end of the fiscal year.
Advance tax growth so far into the fiscal is the lowest in at least four years. The growth rate was 18 per cent in 2018-19, 11 per cent in 2017-18, and 14 per cent in 2016-17 in the same period.
Despite a Rs 45,000 crore reduction in the direct tax collection
target in the Budget, it is far from realistic, officials argue.
Tax officers are also finding signals from the finance minister confusing in her outreach programmes with officers across the country. In one of her meetings in Pune, she asked officers to observe a ‘bit of restraint’ and not to ‘overreach’ while going about tax collection, while also pointing out that the tax collection target was an easy one to achieve.
“While on the one hand we are being told to go easy on taxpayers, on the other hand we have been given a herculean target to achieve,” said a tax officer, adding that the worsening economic situation would make going further tough.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.