Economic disruption caused by the pandemic has pulled down advance tax collection by 76 per cent in the first quarter, which is an indicator of a subdued earnings outlook of the corporate sector this year.
Direct tax collection net of refunds was down 32 per cent as of June 15 over the same period last year. Advance tax collection stood at around Rs 12,000 crore as of June 15, the due date of the first instalment, as against Rs 50,000 crore in the same period last month.
Corporation advance tax posted a 79 per cent decline in collection at Rs 8,572 crore as against Rs 40,488 crore last year. Net direct tax collection stood at Rs 92,681 crore, compared to Rs 1.37 trillion in the corresponding period last year.
Refunds worth Rs 45,143 crore, 28 per cent lower than last year, have been issued by the Central Board of Direct Taxes during this period.
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“Collection has been dismal and nearly invalidates the February budget projections for revenue. The finance ministry should quickly take a re-look and revise these targets, making them realistic to work with. The advance tax data suggests that companies and individual assessees have a negative earnings outlook for the fiscal year,” said a senior government official.
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Mumbai, a key jurisdiction, reported a 78 per cent decline in advance tax collection, while Delhi, Chennai, Kolkata, and Ahmedabad saw a contraction of 76 per cent, 81 per cent, and 84 per cent, respectively. Advance tax means paying tax as and when the money is earned, rather than waiting for the end of the fiscal year.
The first instalment is to be paid by June 15 (15 per cent), the second by September 15 (45 per cent), the third by December 15 (75 per cent), and the final by March 15. Lockdown has affected sectors across the board, with tourism, and hotels and hospitality being the hardest hit.
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GDP growth for FY20 fell to an 11-year low of 4.2 per cent and the economy is projected to face recession in FY21. The Reserve Bank of India on Friday said India’s GDP growth would be in negative territory in 2020-21 as the pandemic has disrupted economic activities.
“The numbers are on expected lines. With recession forecast for the fiscal year, tax collection will be negative for a second straight year. It is only a matter of revising the collection targets to a realistic level for the benefit of tax officers,” said another tax officer.
A growth rate of around 33 per cent will be needed against the rate of 12 per cent estimated in the Budget to meet the target of Rs 13.19 trillion.
The tax department missed the downward revised target for direct tax collection for 2019-20 by Rs 1.17 trillion, a 7.8 per cent fall over the previous year.
The direct tax-to-GDP ratio fell to its lowest in 14 years, at 5.1 per cent, while the indirect tax to GDP ratio was at a five-year low in FY20. This was despite the fact that only a week was under lockdown in the year due to the pandemic.
Direct tax collection net of refunds was down 32 per cent as of June 15 over the same period last year. Advance tax collection stood at around Rs 12,000 crore as of June 15, the due date of the first instalment, as against Rs 50,000 crore in the same period last month.
Corporation advance tax posted a 79 per cent decline in collection at Rs 8,572 crore as against Rs 40,488 crore last year. Net direct tax collection stood at Rs 92,681 crore, compared to Rs 1.37 trillion in the corresponding period last year.
Refunds worth Rs 45,143 crore, 28 per cent lower than last year, have been issued by the Central Board of Direct Taxes during this period.
ALSO READ: RBI relaxes norms for the deployment of ATMs by white-label players
“Collection has been dismal and nearly invalidates the February budget projections for revenue. The finance ministry should quickly take a re-look and revise these targets, making them realistic to work with. The advance tax data suggests that companies and individual assessees have a negative earnings outlook for the fiscal year,” said a senior government official.
chart
Mumbai, a key jurisdiction, reported a 78 per cent decline in advance tax collection, while Delhi, Chennai, Kolkata, and Ahmedabad saw a contraction of 76 per cent, 81 per cent, and 84 per cent, respectively. Advance tax means paying tax as and when the money is earned, rather than waiting for the end of the fiscal year.
The first instalment is to be paid by June 15 (15 per cent), the second by September 15 (45 per cent), the third by December 15 (75 per cent), and the final by March 15. Lockdown has affected sectors across the board, with tourism, and hotels and hospitality being the hardest hit.
ALSO READ: Empty skies, emptier flights: Flying on coronavirus-clipped wings
GDP growth for FY20 fell to an 11-year low of 4.2 per cent and the economy is projected to face recession in FY21. The Reserve Bank of India on Friday said India’s GDP growth would be in negative territory in 2020-21 as the pandemic has disrupted economic activities.
“The numbers are on expected lines. With recession forecast for the fiscal year, tax collection will be negative for a second straight year. It is only a matter of revising the collection targets to a realistic level for the benefit of tax officers,” said another tax officer.
A growth rate of around 33 per cent will be needed against the rate of 12 per cent estimated in the Budget to meet the target of Rs 13.19 trillion.
The tax department missed the downward revised target for direct tax collection for 2019-20 by Rs 1.17 trillion, a 7.8 per cent fall over the previous year.
The direct tax-to-GDP ratio fell to its lowest in 14 years, at 5.1 per cent, while the indirect tax to GDP ratio was at a five-year low in FY20. This was despite the fact that only a week was under lockdown in the year due to the pandemic.
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