Mumbai is also likely to report a lower collection than its target of Rs 2.30 lakh crore for FY15.
The government may fall short of its revised direct tax collection target for FY15 owing to slower-than-estimated growth in tax receipts from companies and individuals, said two income tax department officials.
As on April 4, total direct tax collections were Rs 6.86 lakh crore, about Rs 19,000 crore lower than the revised tax collection target of Rs 7.05 lakh crore, said a senior income tax (IT) official who did not wish to be named.
Mumbai, which accounts for one-third of the nation’s total tax collections, is also likely to report a lower collection than its target of Rs 2.30 lakh crore for FY15.
“In Mumbai, we are expecting to collect about Rs 5000 crore less than the target of Rs 2.30 lakh crore. And if Mumbai fails, it is likely that we will miss the overall target,” said the income tax official.
While the new gross domestic product or GDP series has projected that the economy would grow 7.4 per cent in 2014-15, up from 6.9 per cent from a year ago it does not quite match up with high frequency indicators such as industrial production statistics, purchasing managers indices and corporate earnings. That is probably telling on the tax collection numbers as well.
According to a report from Kotak Institutional Equities, 50 of the nation’s largest firms that make up the Nifty 50 index, are likely to report that profits increased by just 2.3 per cent in the just ended financial year. That kind of growth is a far cry from the 8 per cent increase in corporation tax (revised estimates compared to actuals for 2013-14) the finance ministry is targeting.
If tax collection indeed falls short of the revised target, it won’t be a new trend. For several years now, the revenue department has often been over optimistic on tax collections, based on likely nominal GDP growth and also taking into account inflation, only to falter.
However, an economic slowdown, poor corporate health and one-off events such as poor monsoons have dented their hopes. In three out of the four financial years till 2013-14, actual tax collections have failed to meet the targets set by the government.