The numbers released by the Controller General of Accounts (CGA) on Friday revealed that direct tax collections grew by a meagre 6.6 per cent during April-July of the current financial year against the Budget target of 14.4 per cent for 2018-19. The growth was the lowest when compared with corresponding periods of the past three years.
Corporation taxes, in particular, disappointed the exchequer. These collections grew at just 0.57 per cent, the lowest in the first four months in at least seven years. Corporation taxes are budgeted to yield 10.15 per cent more revenues to the coffers at Rs 6,210 billion in FY2019 against Rs 5,637.45 billion in the previous year.
Personal income tax collections increased by 11.3 per cent in April-July period, also a three-year low in the first four months. Personal income tax is budgeted to grow 19.8 per cent at Rs 5,290 billion in FY19 compared to Rs 4,412.55 billion
a year ago.
Lower direct tax receipts were one of the main reasons for the government overshooting its revenue deficit target for the entire year by 6.3 per cent in just first four months.
Experts said direct tax revenues probably got a dent from refunds. Otherwise, good corporate results in the first quarter would not have yielded so less revenues, they said.
“This (subdued direct tax collections) was probably due to higher refunds,” ICRA principal economist Aditi Nayar said.
Officials said the tax department refunds Rs 750 billion in the first four months of the current financial year, half of what was refunded in the entire FY18.
Corporate results were quite robust in the first quarter of 2018-19. For instance, aggregate sales of the listed companies grew 12 per cent, which was higher than the year-ago period.
Earlier, Finance Minister Arun Jaitley had said that advance tax collections for personal income tax assesses increased by 44.1 per cent and in the corporate tax category by 17.4 per cent in the first quarter of 2018-19.
The subdued direct tax figures may puncture the theory of a successful demonetisation, but officials said that the August numbers would be much higher.
Income tax returns filed this year mainly reflect tax paid in FY18. The Income Tax department has said the returns filed rose 70.86 per cent at 54.2 million till August 31, the last date of filing returns, against 31.7 million a year ago. The main surge was seen in the category of salaried individuals and those prevailing the presumptive taxation scheme, which gives relief to small businesses who perform tasks such as auditing of accounts and maintaining of account ledgers.