Govt could see a shortfall of `40K cr in direct tax collections this fiscal
February, 08th 2016
The government is likely to face a shortfall of Rs 40,000 crore in direct tax collection this fiscal going by the latest tax collection figures as the economic slowdown appears to have had an impact on mobilisation of revenue.
In the first 10 months of 2015-16, the collection has only been Rs 5.20 lakh crore in direct taxes, according to the income tax department. The government had set a direct tax collection target of Rs 7.97 lakh crore this fiscal up 26.5 per cent from Rs 6.30 lakh crore in financial year 2014-15. Lower than projected revenue mobilisation will put further pressure on the government to meet its fiscal deficit target of 3.9 per cent of the GDP for 2015-16.
“While the current growth in direct tax collection is over 11 per cent from the collections in the same period in financial year 2014-15, it is not as per the growth envisaged by the government this fiscal,” said an income tax official who spoke on the condition of anonymity.
According to senior tax officials, tax collections are down because the economy hasn’t recovered in line with expectations.
Although the new GDP series shows the September quarter economic growth at 7.4 per cent, corporate earnings have been tepid with deflation at the wholesale price level. Recent economic data such as the manufacturing PMI which showed a contraction in its latest reading are also seen as evidence of a muted recovery. “The tax collection reflects the current economic conditions also. The recovery has not happened. We are hoping that in the final quarter of this fiscal we will be able to collect more taxes and the tax shortfall will not widen,” said a tax official.
In Mumbai, the income tax department has collected Rs 1.68 lakh crore till January 23- up 15 per cent in the same period a year ago. The Budget target for Mumbai stands at Rs2.56 crore. Mumbai contributes over 34 per cent to the overall direct tax collection in the country.
According to the data, obtained by The Indian Express, while Mumbai has seen an increase in corporate tax collections, income tax collections from individuals and security transaction tax (STT) collections have remained flat. The corporate tax collected by the Mumbai region is Rs 1.1 lakh crore up 17 per cent from a year ago. Income tax collection from individuals were Rs 50,000 crore while STT was Rs 5,779 crore at the end of the first ten months of FY 16.
Some IT officials point to another reason for dip in tax collections . According to them, the drop in tax collections could be due to less tax searches and surveys by the department this fiscal. Till December, the tax department has conducted about 180 searches and surveys down 75 per cent in the same period a year ago.
This is in line with the non-intrusive tax regime promised by the Centre which in the past has been criticised over minimum alternate tax (MAT) notices to foreign investors.