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'Advance tax growth to slow in December quarter too'
November, 15th 2008

Net direct tax collections, which have grown over 36 per cent for the last two years, have come under stress this year. The growth has slowed to 29 per cent in the first seven months of fiscal 2008-09 due to lower advance tax payments by companies.

Central Board of Direct Taxes Member (revenue) Saroj Bala told PRASHANT K SAHU that advance tax payments by companies were likely to go down further in the December quarter and the department was gearing up to mobilise additional revenue from other means like tax deducted at source, recovery of arrears and fresh demands from assessments.

Are net direct tax collections on track? Direct tax collections grew 29 per cent in April-October this fiscal and are mainly driven by corporate income tax. Even within corporate tax, it is more on account of tax deducted at source (TDS), which grew by 48 per cent. In comparison, the advance tax collection growth was only 20 per cent this year as against 30 per cent last year. In fact, advance tax paid by individuals has declined by 26 per cent, mainly on account of higher exemption limit this year.

Are advance tax payments going to come down further?
I think so. I have tried to analyse advance tax payments by top companies in the September quarter. I do think companies will pay much less in the December quarter because of the impact of the global slowdown.

Many sectors are not doing well. Foreign banks, some Indian banks, cement industry, software companies and oil companies have not done well. Advance tax collections from top ten cement companies have declined by 25 per cent while the advance tax paid by top ten software companies has grown only 11 per cent till September. Last year, most of the companies had done well.

Region-wise, Uttar Pradesh and north-eastern states are not doing well. Mumbai, Pune and Gujarat regions have also shown signs of moderation., Delhi, Hyderabad, Bangalore, Kochi and Bhubaneswar have seen good tax collections.

How do you plan to make up for the advance tax shortfall as it normally constitutes a major chunk of total revenue collections?
We are trying to monitor advance tax collections. Secondly, we are trying to persuade and at times ensure through legal recourse that companies pay advance tax and TDS in time. We are carrying out a lot many TDS surveys and verifications. We have found that a large number of companies, even after deducting and collecting taxes, are not paying to the government account by the seventh of next month. We are getting these payments made to the government account.

We have also come across non-deduction or short-deduction of taxes running into crores of rupees. We are enforcing compliance in these cases. We are trying to collect whatever amount we can from the outstanding arrear demands. We are also looking at some quality assessments based on cases selected through computer-aided scrutiny system by using the annual information returns filed by various third parties so that demands are raised in the current year and taxes collected. We are trying our best.

But whatever we are trying to achieve we may not be able to achieve because of shortage of manpower and demoralisation of officers after unfair treatment in the Sixth Pay Commission award.

To augment revenue from these sources, you need a very high morale and a lot of infrastructure. With these two things not there, our field formations are doing whatever best they can to ensure that the target is met.

How difficult is to achieve the Rs 3,95,000 crore target?
According to the Budget estimate, the tax collection target was fixed at Rs 3,65,000 crore (16 per cent growth) for 2008-09. For the last few years, we have constantly achieved over 30 per cent growth in direct tax collections. How long can one maintain such growth? The internal target of Rs 3,95,000 crore (26 per cent) was not based on principles of revenue forecasting. But then, once a target is given, we will make all-out efforts.

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