By M H Ahssan
The rate of growth of advance (direct) tax collection this fiscal has been almost at par with that in 2007-08, despite a drop in GDP growth of 2.5 percentage points or so. As per figures up to mid-March, the year-on-year growth in advance tax payments stood at 17.5% this fiscal, as compared to 18.5% in the corresponding period of the previous year. Till the second quarter of this fiscal, the payments had indeed been robust but a slippage was visible in the third quarter. However, revenue officials claim that the trend thus far in the current quarter denotes a ‘slight improvement’.
Corporate taxpayers must have over-estimated their likely income flows in the year as is evident from the growth in advance tax payments during the initial two quarters of this fiscal, but those who pay personal income tax (PIT) had been more prognostic. While advance tax payments of corporation tax showed an year-on-year growth of 17% at Rs 1.23 lakh crore as on March 17 this year, such payments from individual taxpayers were just Rs 21,415 crore during the period, 20% lower than the amount paid by this category of taxpayers in the year-ago period. Advance FBT (fringe benefit tax) payments partly compensated for the decline in personal income tax with an year-on-year growth of over 30%. Interestingly, through TDS (tax deducted at source) in which the share of PIT is larger than that of corporation tax, the revenue department collected Rs 64,800 crore till March 17, up 17% over the year ago period.
Another feature of the direct tax collection trend is that the Revenue has apparently turned wary of allowing refunds. Despite a 15% growth in gross direct tax collection up to March 17, at Rs 3.43 lakh crore, the total refund to all categories of taxpayers stood at Rs 32,484 crore in the period, down about 10% from Rs 35,990 crore in the corresponding period a year ago. This has helped the Revenue to keep the net collection rather impressive at about Rs 3.2 lakh crore (inclusive of the ‘central TDS’), as against Rs 2.6 lakh crore in the year ago period, which represents a 23% growth. Less refunds would mean less disposable income in the hands of the taxpayer—a factor that limits fiscal expansion, the government’s stated policy at this juncture, albeit marginally. One can say that while the government has tinkered with the rates of indirect taxes for giving fiscal stimuli to the economy, the direct taxes were a tool in its hands to calibrate the stimulation, if not counteract it.
Revenue officials say they are confident of ‘meeting’ this year’s RE (revised estimate) of Rs 3.48 lakh crore as far as net collection is concerned. This will be 13% higher than last year’s net collection of Rs 3.09 crore.
They are relying on the ‘slight improvement’ in tax payments since the third quarter and an augmented collection drive. But a CBDT official told ET that faster accounting enabled by e-payments must also have contributed to what is being perceived as a slowing of the declining trend in collection. It is likely that companies that had over-paid their taxes in the initial months of this fiscal through the advance tax window must actually scale down payments in the last quarter. So the traditional flurry in the last two weeks of the fiscal might be of much less intensity this time around. Yet, the RE could be met.
However, the budget estimate of Rs 3.8 lakh crore for next fiscal (2009-01) as stated in the UPA government’s interim Budget appears over-ambitious, given the state of the economy. When economy grew at 9% over a similar growth base, the direct tax collection had risen by about 35%, as was seen in 2007-08. As the economic growth slipped from there to 6.5% or so (which is a 27% decline), the growth in direct tax collection seems to decline steeper—from a growth of 35% to just 13%, which is a 62% fall.
So, if the economic growth declines further to 5-6% in the next fiscal as many economists now predict, the growth in direct tax collection could be almost flat if not negative. It would be near impossible to achieve a net collection of Rs 3.8 lakh crore next fiscal as it demands a 10% growth. It is very likely that the Revenue, in its enthusiasm to prevent collection growth from falling too much, will turn more and more stingy with regard to refund pleas.
No comments:
Post a Comment