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Direct tax collection falls in Aug

Personal income tax more than halved to Rs 15,392 crore, from Rs 32,631 crore in July

Indivjal Dhasmana  |  New Delhi 

Direct tax collection falls in Aug

A huge fall in — both personal income tax and corporation tax — in August has come as a surprise. Within direct tax collections, corporation tax mop up declined to Rs 9,634 crore in August, down almost 40 per cent from Rs 16,046 crore in July, according to data issued by the Compared to August 2016, it was down 28 per cent, from Rs 13,403 crore. Similarly, personal income tax more than halved to Rs 15,392 crore, from Rs 32,631 crore in July. Year-on-year, the decline was 17 per cent, from Rs 18,084 crore. Direct tax collection falls in Aug India Ratings’ Chief Economist Devendra Pant says the figures show industrial growth has not recovered. The Index of Industrial Production rose only 1.2 per cent in July, against a contraction in June. Another reason for the low figures could be higher refunds, suggests Aditi Nayar, principal economist at ratings agency On the brighter side, the cumulative collection in both personal income tax and corporation tax has remained robust, due to higher figures earlier in the current financial year. Corporation tax collection in April-August, first five months of this financial year, rose 15.5 per cent to Rs 92,939 crore over the same period last year. Similarly, personal income tax collection was up 13.3 per cent at Rs 1.24 lakh crore in the first five months. Direct tax collection falls in Aug In total, direct taxes grew 14.2 per cent to Rs 2.17 lakh crore in April-August, from 1.9 lakh crore a year before. Finance Minister Arun Jaitley recently said up to September 18 was Rs 3.7 lakh crore, about 15.7 per cent more over the same period last year. The Budget Estimate (BE) for this financial year also pegs growth at 15.7 per cent. This implies the August figures are exceptionally low. Jaitley had also said the number of taxpayers increased from 40.7 million in 2012-13 to 60.3 mn in 2016-17. Despite the dip in August, tax revenue at Rs 3.4 lakh crore constituted 27.8 per cent of the BE at Rs 12.3 lakh crore for all of 2017-18. Higher than 26.6 per cent at this point of time in 2016-17 and higher than the trend till July, by when 21 per cent of the BE was received from taxes, both in this financial year and the previous one. This meant indirect tax collection came to the rescue. August was the first time that goods and services tax (GST) figures were fully taken into account. Central GST contributed Rs 15,263 crore in August. In the July figures, GST collections were taken into account but only Rs 10 crore in the case of CGST. Similarly, Integrated GST (IGST) yielded almost Rs 71,000 crore in August, against Rs 34 crore in July.

However, IGST of Rs 21,000 was included in customs duty in the case of July. Compensation cess of Rs 7,749 crore was collected in August against nil in July. Some of this would be adjusted for input tax credit and the cess will go to loss incurring states. With non-tax revenue also falling compared to the BE and compared to the corresponding period a year before, the government put a brake on expenditure, with revenue spending rising only two per cent in August, year-on-year. Revenue expenditure for April-August was Rs 8.41 lakh crore, about 46 per cent of the full-year target, compared with 41 per cent for the first five months of 2016-17. The biggest brunt of spending cut was borne by capital expenditure, down 26 per cent in August on a yearly basis. This resulted in capex of Rs 1.09 lakh crore or 35.5 per cent of the full-year estimate, down from 37 per cent for the same period last year. Till July, capex was higher this year compared to April-July of 2016-17. Even then, the Centre's fiscal deficit touched 96 per cent of BE till August. For the rest of the year, then, the government will have to ensure its expenditure in excess of revenue is only four per cent. The Budget target was to keep the fiscal deficit no more than 3.2 per cent of the country’s gross domestic product (GDP). Already under stress, as nominal growth in 2017-18 might not be 11.4 per cent as was assumed in the Budget. For the first quarter, grew only 9.3 per cent. Pant feels the fiscal deficit figures would breach the Budget target, to stand at 3.46 per cent of for 2017-18, close to the 3.5 per cent in 2016-17. He pegged the gap to widen by Rs 40,000 crore over the Budget figure of Rs 5.46 lakh crore. If so,, it would be a challenging for the government to give a fiscal stimulus to boost the economy. On Thursday, Subhash Garg, the economic affairs secretary, had said the Centre’s borrowing programme would be re-assessed in December. Any increase in this raises the possibility of higher-than-budgeted spending, and a fiscal expansion if the corresponding revenue isn’t realised.

First Published: Mon, October 02 2017. 02:20 IST