Direct Tax Collection Falls Even After Advance Payouts

India’s direct tax collections for the ongoing financial year fell, according to a government official, as the economy grapples with a slowdown for more than a year.

The mop-up dropped 5 percent year-on-year to Rs 9.5 lakh crore during April 2019 and March 16, 2020, the official told BloombergQuint on the condition on anonymity. That’s 81 percent of the government’s Rs 11.7-lakh-crore direct tax collection target for the financial year ending March 2020.

The collections include advance tax for the fourth quarter that is to be paid by March 15.

The government’s tax revenue has not grown as expected as Asia’s third-largest economy is set to grow at its slowest pace in a decade. That prompted it to revise the direct tax collection target to Rs 11.7 lakh crore from Rs 13.3 lakh crore estimated in the budget presented in July 2019. Now the novel coronavirus outbreak threatens even the scaled-down estimate.

Of the Rs 9.5 lakh crore, the official quoted above said Rs 5.2 lakh crore was collected as corporate income tax and Rs 4.3 lakh crore as personal income tax. That’s against the targeted Rs 6.1 lakh crore and Rs 5.6 lakh crore, respectively.

The Central Board of Direct Taxes spokesperson has yet to respond to BloombergQuint’s emailed queries.

Emkay Global Financial Services, in a February report, said the targeted growth rate for February-March 2020 period in gross tax revenue collection was 22.1 percent year-on-year. That’s steep compared with the contraction of 2 percent year-on-year for the April-January 2020 period, it said. The brokerage estimated a “major curb” in spending to meet the fiscal deficit target.

On Monday, Minister for State for Finance Anurag Thakur told lawmakers that net direct tax collections dropped 3.5 percent over last year to Rs 8.1 lakh crore in April-February 2020. The government is taking steps, including monitoring of advance tax payments by top taxpayers, recovery of outstanding demand and monitoring payment of tax deducted at source by top deductors, among others, to maximise direct tax collections, Thakur said.

Still, the government was expected to close the current fiscal with a shortfall in tax collections, according to Amit Singhania, a partner at Shardul Amarchand Mangaldas & Co. Still, he told BloombergQuint, collections under Vivad se Vishwas Scheme, recovery of outstanding TDS and recovery of partial tax demand arising from recently concluded assessments could help narrow the gap,

Another government official told BloombergQuint that the ‘Vivad se Vishwas’ Scheme—a tax dispute resolution mechanism—was expected to help the government mop up more than Rs 1 lakh crore in direct taxes. The scheme, however, is yet to be notified by the government.