Net direct tax collection went up by 11 per cent to reach Rs 3.80 lakh crore so far this fiscal, showing continuing economic growth and resilient GDP growth of the country, said experts. “Growth in both net and gross tax collections is in line with, or slightly higher than the overall budget estimates for the year. The net direct tax collection (including STT) of Rs 3.79 trillion during the period April 1 to June 17, 2023 represents a 11.18 per cent growth over the collections in the previous year. The gross collection of Rs 4,19,338 crores represents a 12.73 per cent growth. This bodes well for India and reflects continuing GDP growth and enhanced economic activity in the current financial year, which is the first normal year post Covid,” said Rajnish Gupta, Associate Partner – Tax and Economic Policy, EY.
As of June 17, the figures of direct tax collections for the financial year 2023-24 showed net collections of Rs 3,79,760 crore, compared to Rs 3,41,568 crore in the corresponding period of FY2022-23, said the finance ministry earlier this week. This includes corporation tax (CIT) at Rs 1,56,949 crore and personal income tax (PIT) including securities transaction tax (STT) at Rs 2,22,196 crore. The Advance Tax collections for the April-June quarter of 2023-24 stood at Rs 1,16,776 crore as of June 17, reflecting a growth of 13.70 per cent over the same period last fiscal.
“Advance taxes being higher is a barometer of current performance and seems to indicate the economy is in good shape. Refunds are at record levels and that indicates the Government is using TDS and TCS to mainly shore up cash tax collections. Every year cash tax collections go up disproportionally mainly due to new ways being used to enhance TDS and TCS provisions. These largely result in huge refunds. All these transactions eventually result in higher cost of doing business. The Government needs to evaluate the efficacy of the same,” said Rohinton Sidhwa, Partner, Deloitte India.
Earlier, after the Finance Minister Nirmala Sitharaman presented the Union Budget 2023 and announced attractive tax proposals under the new tax regime, Revenue Secretary Sanjay Malhotra has said that the government would eventually like to move to a simple and exemption-free tax structure with lower rates.
In the Budget announcement, India had proposed changes to a new optional tax regime according to which no tax would be levied on people with annual income of up to Rs 7 lakh. It also allowed taxpayers to claim standard deduction of Rs 50,000 under the new regime.
“The surge in direct tax collections (advance taxes) for the first quarter is a result of the consistent efforts of the government towards an exemption free taxation system thus leading to a larger taxable base,” said Sneha Pai, Senior Director Direct Tax, Nexdigm.
Sneha Pai added, “TDS and TCS are the most effective ways to ensure collection of taxes in advance and on a real time basis as and when a transaction takes place. Further, TDS is on payment and is attracted irrespective of the recipient having losses or no tax payable eventually, thus increasing the tax collection in advance.” Under Section 194Q, TDS is applicable on the purchase of goods, if the amount exceeds Rs 50 lakh. Under Section 206C (1H), TCS is applicable on the sale of goods, if the amount exceeds Rs 50 lakh.
While it is too early to comment on the eventual direct tax collection for the year, Rajnish Gupta stated, “Tax collected in the first quarter as a percentage of the annual tax revenues of the Government varies from year to year.” Factors including movement of the global economy, any possible geo-political events that could influence petroleum prices, and inflation levels in the balance of the year, will play an important role, he concluded.