The first installment of advance corporate tax due by next Wednesday will tell the government how much of a fiscal problem it expects for 2011-12. Government officials say this will give them a clear indication if corporate India has turned pessimistic or whether the blip in tax collections in the first two months was an aberration.
Finance minister Pranab Mukherjee, anticipating a tough year to balance his books, has asked the revenue officials to put in ?extra effort for achieving the challenging task?, while finance secretary Sunil Mitra stated on Wednesday it would not be an easy task to meet the tax mop-up estimates for 2011-12.
In April-May, the direct tax receipts were only R12,954 crore. This is a 48% dip in the growth rate over last year. In other words, going by the government estimates the total collections from direct tax should have been R33,670 crore.
Deloitte India Tax Partner Homi Mistry said high inflation could affect economic growth, thereby affecting revenue collection. However, advance tax numbers and first quarterly results of corporates will give a fair idea of how the numbers are shaping up, he said.
The situation for the revenue department is better in the case of indirect tax. The government collections are in sync with the annual trend rate of growth of 38.2% (according to the FRBM statement) till the end of April. But as growth in the industrial sector slows this too could become worse soon. The government has pegged the indirect tax target for the current fiscal at R3.92 lakh crore and for direct taxes at R5.32 lakh crore.
According to Crisil chief economist DK Joshi, ?When the growth goes down, naturally it will impact the revenue collection and it would be lower than the estimated.? He added that the lower revenue collection would impact the fiscal deficit target for the current financial year.
?I expect it to be at 5% of the GDP against 4.6% as projected by the government,? he said.