Corporate advance tax payments for October-December quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal, pointing to a firm broad-based economic recovery. This has raised hopes of the government meeting its overall direct tax collections target for the year.
With an over 20% growth in advance tax payments, the government expects the direct tax collections for the current fiscal to well exceed the initial budget estimate of Rs 3.7 lakh crore, said a finance ministry official.
However, it is unlikely that the Rs 4 lakh crore target set by the central board of direct taxes will to be met.
Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter.
The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods doing well.
The increase in advance State Bank of India led the tally of top taxpaying companies by paying the highest advance tax in December quarter at Rs 1795 crore, up 5.59%.
The other top ten taxpayers includes ONGC with Rs 1917 crore, LIC with Rs 981 crore, RIL with Rs 834 crore, SAIL with Rs 1100 crore, NTPC with Rs 1078 crore, Deposit Insurance and Credit Guarantee Corporation with Rs 659.84 crore, BHEL with Rs 500 crore, ITC with Rs 690 crore and Punjab National Bank with Rs 618 crore.
The overall gross direct tax collections stood at Rs 2,51,000 crore, in April- December 19, 2009, a growth of 8.5% over corresponding period last financial year.
The government is banking on a strong growth in the corporate tax collections in the last quarter, allowing it to reach the budget target of Rs 3.7 lakh crore.
Any shortfall in direct taxes collections will put pressure on governments finances as indirect tax collections are also way behind the estimates, reflecting the cut in duty rates given to counter slowdown.
Indirect tax collections for the period April-November were down 18.3%.
Second half of financial year is better than the first. I do not see any big risk on direct tax front as corporate performance is expected to improve since recovery is setting in, said Abheek Barua, chief economist, HDFC Bank
Advance tax is paid in four instalments in June, September, December and March and is based on taxpayers projected income and thus gives an indication of industrys performance in coming months.
The government has already taken Parliaments approval for an additional net spending of over Rs 25,000 crore. It plans to meet this additional spending through savings, implying that there is little possibility of any further cut in expenditure.
Any revenue shortfall will, therefore, have to be met through higher borrowings, further pushing up the fiscal deficit pegged at 6.8% of GDP in 2009-10.