After remaining robust in the first six months of the current financial year, direct tax collections seems to be slowing down. Direct tax collections grew by 11% in October, 2008 at Rs 19,708 crore, compared to Rs 18,809 crore in the corresponding period in last fiscal.
This is could give reason to worry as it is the first time this fiscal that the growth in collections has slipped below the growth rate of 25.6% required to achieve the target. The government had scaled up the collection target set in budget from Rs 3,65,000 crore to a little less than Rs 4,00,000 crore. To achieve the initial budget estimate, direct taxes need to grow by 16.07%.
Though, tax collections in October showed some signs of slowdown, robust growth in earlier months provide some comfort. Tax collections of corporate tax and personal income tax including fringe benefit tax, securities transaction tax and banking cash transaction tax grew by 29.52% in April-October, 2008 period at Rs 1,66,905 crore. Corporate tax collections grew by 32.74% at Rs 1,05,174 crore while personal income tax by 17.65 % in the first seven months of the current financial year. Fringe benefit tax grew by 47.43% at Rs 4061 crore in the same period. The lack lustre stock market cast its shadow on securities transaction tax collections which witnessed a negative growth of 1.6% at Rs 3724 crore. Banking cash transaction tax grew by 17.73% at Rs 366 crore.
Finance ministry sources pointed that the main reason for the relatively slower growth in October was mainly on account of corporates paying self assessment tax in September itself, as the last date of filing of tax return forms was advanced to September 30. To put it simply, companies after assessing their income in a financial year have to pay tax in advance in four instalments.