The governments tax kitty grew by a modest 3.65% in the first quarter of the current financial year. A high base effecthigh growth in April-June 2008and higher refunds this year have been largely responsible for the modest growth.

The first quarter of last financial year was better in terms of growth, so if we compare on a quarter-to-quarter basis, this figure is reasonable, KPMG executive director Vikas Vasal said. Direct tax collections had grown by over 38% in the first quarter of 2008-09.

Direct tax collections must grow by at least 9% for the government to achieve its budget target of Rs 3,70,000 crore. Any shortfall in tax collections, especially direct taxes that now constitute most of the governments revenue collections, will put further pressure on the fiscal deficitthe difference between the governments total expenditure and receiptspegged at 6.8% for the current fiscal. A higher deficit means more borrowings, which could put pressure on interest rates, thereby increasing cost of funds for the private sector. However, collections are expected to be better in the second half of the financial year as the economic recovery stabilises.

Direct tax collections, which include taxes such as those on corporates, firms and individuals, stood at Rs 59,465 crore during the first quarter of the current fiscal against Rs 57,373 crore during the corresponding quarter last financial year, according to official data released by the Central Board of Direct Taxes. Taxpayers received Rs 17,600 crore as refunds from the government. This represents a 52.01% growth over Rs 11,578 crore given in refunds in the first three months of last fiscal.

Lower growth in net tax collection was mainly on account of higher tax refund outgo, an official statement said here on Wednesday. Corporate tax collected during the period was also 3.31% higher at Rs 35,709 crore compared with Rs 34,566 crore in April-June 2008-09. On the personal income tax front, which includes fringe benefit tax and securities transaction tax, the government collected Rs 23,780 crore, a growth of 4.38% compared to last year.

FBT recorded a negative growth of 7.56% at Rs 1,031 crore (Rs 1,115 crore) and STT declined 9.90% to Rs 1,462 crore (Rs 1,623 crore).