Net direct tax collections up to July 2017 in the current financial year stood at Rs 1.90 lakh crore, 19.1% higher than in the corresponding period of the previous year, according to official data released on Wednesday. Within this, net personal income tax grew 15.7% and net corporate tax grew 23.2% over the same period.
In comparison, growth in net direct tax collections up to July 2016 in the previous financial year stood at 24%, while growth in personal tax collections was 46.5% and in corporate tax collections was 2.84%.
The slowdown in the overall economy as well as the impact of a high growth base last year could be the factors responsible for slower growth in direct tax inflows, said experts.
“Mostly the lower growth seen this year is due to the base effect,” DK Srivastava, Chief Policy Advisor at EY India said. “Last year, there was an out of line growth, and measured against that, this ear’s number would show lower growth.”
“The rate of growth in tax collection is intimately connected with growth in productivity of the manufacturing, service, and agriculture sectors,” SP Singh, Senior Director, Tax, at Deloitte said. “If there is a fall in these sectors, the impact appears in personal tax and other tax collections.”
Mr Singh also said that a slowdown in personal tax collections could also reflect a slowdown in small business activity, since salary income tends to grow from year to year.
“So, one of the possible reasons for fall in personal tax is that small businesses might have slowed down,” Mr Singh said.
“The Direct tax collections up to July 2017 in the current financial year 2017-18 continue to register steady growth,” the government said in a release. “Direct tax collection during the said period, net of refunds, stands at Rs 1.90 lakh crore which is 19.1% higher than the net collections for the corresponding period of last year. This collection is 19.5% of the total Budget Estimates (B.E.) of direct taxes for the Financial Year 2017-18.”
“So far, as the growth rate for corporate income tax (CIT) and personal income tax (PIT) in terms of gross revenue collections is concerned, the growth rate for CIT is 7.2% while that for PIT is 17.5%,” the release added. “However, after adjusting for refunds, the net growth in CIT collections is 23.2% while that in PIT collections is 15.7%.”
Mr Srivastava, however, warned against drawing a conclusion about the efficacy of the government’s various efforts to widen the tax net—such as demonetisation, Operation Clean Money, and its awareness generation initiatives—based on these numbers.
“One quarter’s numbers are not enough to indicate whether the government’s measures have succeeded or failed,” he said. “A growth of 19% is still very good for direct taxes.”
Refunds amounting to Rs 61,920 crore were issued during April-July 2017, 5.1% lower than the refunds issued during the corresponding period of the previous financial year.
The Income Tax Department had on Monday highlighted that the growth in the number of income tax returns filed as of August 5, 2017 was 24.7% compared to the 9.9% seen in the same period of the previous year, ascribing this increase to demonetisation and Operation Clean Money.