A steep increase in tax refunds is as much a reason for the less-than-expected tax revenue collection this fiscal as the slowdown in economic growth. In April-January 2011-12, the income-tax department has given R78,000 crore in refunds, up by R4,000 crore in the whole of the previous fiscal. Pertinently, the government was on a refund drive last year.
According to sources, the revenue department asked many companies to pay more advance tax in the previous fiscal to meet its target and these companies are now being paid refunds. This has put pressure on the tax mopup at a time when direct tax target looks difficult.
In the last month of 2010-11, the government collected R75,802 crore as corporate tax, which was 20% more than the previous year.
The bulk of this amount was in the form of advance
tax. The government had estimated direct tax collection of R4.30 lakh crore in the 2010-11 budget, which was later revised upwards to R4.46 lakh crore. The total mopup even breached the revised estimate at R4.50 lakh crore. The refunds for 2010-11 stood at R74,000 crore while it was R57,000 crore in 2009-10.
The direct tax mopup until January has grown by a mere 9.28% to R3.46 lakh crore, well below 19% growth required to take the collection for the full fiscal to the budgeted level of R5.32 lakh crore for 2011-12. This means the finance ministry has to mobilise up to R1.86 lakh crore to achieve the target in the last two months of the fiscal, an uphill, if not impossible, task. The muted collection so far is due to low growth in corporate tax and refunds of R78,315 crore.
During April-January, corporate tax collection rose
by just 5% to R2.27 lakh crore, while personal income tax collection grew 18.38% to R1.18 lakh crore.
There has also been slowdown in the economic growth. India?s economy recorded just 6.9% growth in the second quarter ending September for the current fiscal, slowest in more than two years. Signalling troubled times ahead, growth
fell sharply in comparison to 7.7% expansion logged
in the April-June quarter of the current fiscal and 8.4% registered in the second quarter a year ago.