Direct tax collections are set to fall short of the revised target in FY10, making the current fiscal year the second in a row in which the taxmen have failed to meet government-set targets.
The government had wanted to collect Rs 4 lakh crore, but the actual take is expected to fall short of this by Rs 30,000 crore, meeting the original target set by Central Board of Direct Taxes (CBDT), the body that administers direct taxes.
We have collected Rs 3.68 lakh crore so far and are expecting some more receipts in the first week of April. Therefore, there will be no problem in meeting the original target of Rs 3,70,000 crore, SSN Moorthy, chairman, CBDT, told Media.
A below-par performance by certain sectors such as banking and petroleum resulted in the governments tax take falling below its expectation. The banking sector, which account for a third of the corporate taxes, had taken a beating last fiscal.
According to I-T sources, the tax outgo of domestic banks remained flat while foreign banks with branches in India paid around 60% less tax than a year earlier. A decline in demand for loans, a cautious approach to lending and fewer investment banking deals this fiscal suppressed the margins of the banks, an I-T source said.
The good news, according to some tax officials, is that the situation is considerably better than that on March 15, the last date for paying advance tax, when the gap between actual collections and the revised target was a forbidding Rs 70,000 core, said tax officials.
The government sets a target for tax collection in the Budget, which it revises, usually in an upward direction, during the year. The target for 2009-10 were set in the budget presented shortly after the general elections in May.
In the previous fiscal (FY09), collections fell Rs 60,000 crore short of the revised target of Rs 3.95 lakh crore. The low collections last fiscal were the outcome of impaired performance by corporates in light of the global economic downturn during the period.
However, the situation in India started improving from the early part of the current fiscal, as a slew of fiscal and monetary stimuli in the form of excise duty and interest rate cuts put in place by the government to contain the recession began to revive demand.
Also this time around, the tax authorities have taken all possible steps to plug tax leakages. Chief commissioners and commissioners took steps to ensure that companies did not take recourse to delaying tactics such as opting to make part payments first and the rest later as self-assessment tax.
Some companies do this because paying interest to the tax department for delayed in advance tax payments is cheaper than borrowing money from the open market. The department has also carried out surveys and raids to discourage potential tax evaders.