Direct tax collection off target as companies log tepid profit growth
April, 12th 2012
The government has fallen short of its direct tax collection target of Rs 5 lakh crore for FY12 even after revising the projections thrice as the economic slowdown impacted companies which reported a marginal increase in profits in the fourth quarter of the last fiscal.
The all-India tax collection, as on April 11, was below Rs 4.95 lakh crore, according to figures available with the income-tax department, senior officials said. The revenue department had revised the target twice last fiscal, revising it upwards from the original target of Rs 5.32 lakh crore to Rs 5.80 lakh crore during the course of the year, only to rework it to Rs 5 lakh crore towards the close of FY12.
The original target of Rs 5.32 lakh crore was nearly 19% higher than the collection of Rs 4.48 lakh crore in FY11. Initially, the government had pegged the target high hoping to keep the fiscal deficit at below 5% of the GDP in 2011-12. The government has projected a fiscal deficit of 5.1% in 2011-12.
CBDT chairman was not available for comment as he was travelling abroad. The chief commissioner of income-tax, Mumbai, NP Singh, declined to comment on the shortfall. "I cannot give a reason for the shortfall," he said.
However, senior officers of the I-T department are of the view that the government should be reasonable in fixing the target, since tax collection is linked to the state of the economy and the growth in national income.
Knowing that the odds were against it, the CBDT had issued a veiled warning to its chief commissioners saying that their transfers and promotions would be linked to tax collections in their respective jurisdictions. But all that has not worked.
Considering the tax collected by April 11 and measured against the revised target of Rs 5.80 lakh crore mid-way through 2011, the shortfall in collections is a whopping Rs 85,000 crore. The last time there was a substantial shortfall was in 2008-09 when the economy was impacted because of the global financial crisis. That year, the shortfall was at Rs 60,000 crore while the target was nearly Rs 4 lakh crore.
The revenue authorities were expecting to meet at least the original target of Rs 5.32 lakh crore, hoping to make up in the last quarter of FY12 with the fourth installment of advance tax payments due on March 15. But most companies have reported only a marginal increase.
However, foreign banks were an exception, reporting a substantially higher profit than last year. The three state-owned oil companies did not report any profits in the last quarter. The Supreme Court judgement in the Vodafone case proved to be another setback that deprived the I-T department of nearly Rs 20,000 crore by way of taxing cross-border acquisitions involving Indian companies.