It is a fact that the net direct tax collection for the FY 2019-20 was less than the net direct tax collection for the FY 2018-19. But this fall in the collection of direct taxes is on expected lines and is temporary in nature due to the historic tax reforms undertaken and much higher refunds issued during the FY 2019-20," the CBDT said.
Gross direct tax collections for 2019-20 fell almost 5% at Rs 12.33 lakh crore against the previous year’s Rs 12.97 lakh crore, the Central Board of Direct Taxes said on Sunday.
“This fall in the collection of direct taxes is on expected lines and is temporary in nature due to the historic tax reforms undertaken and much higher refunds issued during the FY 2019-20,” CBDT said in a statement.
The board attributed the fall in collections to a combination of factors, including 14% year-onyear increase in refunds issued, cut in the corporate tax rate to 22%, reduction in minimum alternative tax (MAT) to 15% for existing units, reduced rate of 15% for new manufacturing units, increase in standard deduction to Rs 50,000, and income tax exemption for people earning up to Rs 5 lakh a year.
It said the measures taken under the tax reforms had direct impact on tax collections with Rs 1.68 lakh crore of revenue foregone, including Rs 1.45 lakh crore for corporate tax and Rs 23,200 crore for personal income tax. Further, refunds of Rs 1.84 lakh crore were issued in FY20, higher than Rs 1.61 lakh crore issued the year before. This is the first time in over a decade that tax collections have dipped on-year.
The board also dismissed reports that tax buoyancy compared to GDP growth had reached negative. If the effect of tax reform measures and higher issuance of refunds during the FY20 was excluded, the buoyancy of total gross direct tax collection came to 1.12 and almost 1for corporate tax and 1.32 for personal income tax, it said.
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