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Amid slowing economy, corporation tax mop-up contracts 1% in Apr-Nov

The collection numbers are expected to worsen further once the impact of the corporation tax rate cuts becomes visible in the third advance tax collection instalment due on December 15

Dilasha Seth  |  New Delhi 

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collection contracted by 1 per cent in April-November 2019 compared with the same period last year, amid a slowing economy, even as the impact of the rate cuts, announced in September, is yet to reflect in the numbers. Negative growth in the mop-up pulled down direct tax collection growth to 1.5 per cent in the first eight months of the current financial year.

Direct tax collection, after adjusting for refunds, touched Rs 5.5 trillion at the end of November and will require a growth rate of 31 per cent in the remaining period to meet the Budget target of Rs 13.35 trillion.

Personal income tax collection expanded by 5 per cent during this period, as against the full-year target of 22.4 per cent at Rs 5.69 trillion. The collection target for corporation tax in the FY20 Budget stood at Rs 7.66 trillion, a year-on-year growth rate of 15.4 per cent.

The collection numbers are expected to worsen further once the impact of the corporation tax rate cuts becomes visible in the third advance tax collection instalment due on December 15. As an economy revival measure, Finance Minister had on September 20 announced a tax rate cut from 25-30 per cent to 22 per cent for existing companies which do not avail of any exemptions, and 15 per cent for new companies, besides a reduction in minimum alternate tax from 18.5 per cent to 15 per cent.

Amid slowing economy, corporation tax mop-up contracts 1% in Apr-Nov

“The impact of the economic slowdown alone will hit the direct tax collection target by at least Rs 1 trillion, if we assume that the mop-up grows by 8 per cent as against the targeted 17.3 per cent growth. But even 8 per cent is highly overestimated with our collections hovering at 1-2 per cent up to November,” said a government official.

The impact of the corporation tax rate cuts could be in the range of Rs 70,000 crore and Rs 1 trillion, according to several estimates.

“Collections are set to worsen in December, with the impact of the corporation tax rate cut to also get reflected,” said another official.

Gross direct tax collection stood at Rs 7 trillion, of which Rs 1.5 trillion has been issued as refunds.

First Published: Wed, December 04 2019. 01:31 IST
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