With the ongoing economic slowdown affecting the profits earned by companies, the net direct tax collections growth remained in the negative territory for the second consecutive month in December.
Initial estimates reveal net direct tax receipts dipped 13.4 per cent to Rs 52,749 crore in December 2008, compared with Rs 60,976 crore in December 2007. In November, the collections fell 36 per cent.
Net direct tax collections refer to tax collections after refunds, but before transfer of states share in the central revenue. Thus, the direct tax collections for the nine months ended December 2008 have slowed down to 11 per cent as against 40 per cent growth during the corresponding period in 2007-08.
Direct tax collections have to grow at a rate of 16 per cent to achieve the Budget target of Rs 3,65,000 crore in the current fiscal. The shortfall is likely to put pressure on fiscal deficit as the government has increased its spending as part of the stimulus package and has also foregone revenue by cutting taxes.
Direct tax collections stood at around Rs 2,30,000 crore in the first nine months of 2008-09 as against Rs 2,06,029 crore in the corresponding period in the last fiscal, sources said.
Already, the government is struggling with rising expenditure on account of the farm debt waiver scheme and implementation of the Sixth Pay Commission report. The RBI yesterday announced that the government would borrow a higher-than-expected Rs 50,000 crore in bonds between January 5 and March 31 this year, possibly to fill the gap due to anticipation of a lower-than-targeted tax collection.