Signalling the onset of an economic slowdown, the advance tax paid by corporates has witnessed a marginal growth of 13% to R68,000 crore in the second quarter of the current fiscal, compared with the corresponding period last year.
The moderate growth may put pressure on the tax mop-up for the year as corporate collections comprise almost two-third of total direct tax collections.
In the current financial year, the government expects to collect about R3,60,000 crore as corporation tax. This is 21% higher than the actual corporate tax revenue last fiscal.
So far, the corporate collections have reached R1,18,000 crore or less than a third of the target, fuelling fears that a slowdown might hit collections further in subsequent quarters and the target could be missed.
The advance tax receipts in the second quarter fare badly even in comparison to collections from India Inc in the first quarter when a 19% year-on-year growth was registered.
According to the data gathered by FE, the bigger companies have emerged the main culprits for a sluggish growth in collections. These companies have performed badly compared to the smaller ones with the tax payment by top 100 companies increasing by a mere 10% on a payment of R31,700 crore.
A finance ministry official said it would be a task to achieve the direct tax collection target for the current fiscal. This year, the government has targeted R5.32 lakh crore in direct taxes, 19% higher than the revised estimate of last year.
?The moderate growth in advance tax shows that corporates are concerned about their profitability in the remaining part of the year,? the official said.
Among the big companies which paid lower advance tax in the July-September quarter as compared to the corresponding quarter last year are SBI, Airtel, Maruti Suzuki, SAIL, Nalco, IOC and BPCL. SBI paid 10.5% less tax at R1,650 crore in the second quarter, while Airtel?s payment declined 21% to R252 crore.
Similarly, Maruti Suzuki?s tax plummeted 55% to R120 crore, SAIL by 25% to R541 crore, Nalco by 38% to R75 crore and BPCL by 80% to R35 crore. IOC paid no tax as compared to R351 crore it paid in the corresponding period last year.
On the other hand, ONGC?s tax payment rose 25% to R3,000 crore, while India’s biggest private sector company Reliance Industries’ tax outgo rose 67% to R2,000 crore in the second quarter, while that of TCS zoomed 111% to R570 crore.
After being in the negative territory for five-and-half-month, the growth in the net direct tax collection turned positive for the first time in the current financial year, after companies paid the second installment of their advance tax. The net mop-up at the end of September 17 stood at R1.80 lakh crore, an increase of just 7% over the year-ago period. Out of R 1.80 lakh crore, the corporate tax mop-up was R1.18 lakh crore, while R62,000 crore was collected as income tax. The muted growth in revenue collection could also be attributed to huge refunds of R61,500 crore disbursed so far in the current year.
The moderate growth in tax collection could be partially attributed to slow industrial growth. India’s industrial growth plunged to a 21-month low of 3.3% in July as compared to a healthy 9.9% a year ago and 8.8% in June. The growth is the worst since October 2009 when it grew at 2.3% when the economy was reeling under the impact of the global financial crisis.