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Poor growth in corporate tax collections has added to the Government’s fiscal woes.
Gross direct tax collections, including Corporate Tax, Personal Income Tax, Securities Transaction Tax and Wealth Tax, grew by just 6.51 per cent during the first five months (April-August) of the current fiscal, over the year ago period.
This is less than half the growth rate the Government was hoping to see. The Finance Ministry has targeted Rs 5.70 lakh crore to be collected through direct tax during 2012-13, a growth of 15 per cent. However, Finance Minister P. Chidambaram is hopeful of a turnaround in the second half of the current fiscal.
Gross collections in the first five months stood at Rs 1.64 lakh crore as against Rs 1.54 lakh crore during the same period of the previous fiscal.
However, lower refunds propped up the net collection, which grew by over 28 per cent. It may be recalled that large refunds had brought down the net collection last fiscal.
This number has come at a time when the Government is expecting good collection from advance tax due on September 15. This date will see the payment of the first instalment by the individual assessees and second by the corporate assessees.
Apart from the dismal performance of corporate tax, Securities Transaction Tax (STT) has shown negative growth. The strong growth in personal income tax has, to some extent, made up for this shortfall.
Now, the Finance Ministry aims to boost the collection by focussing on those corporate sectors which are paying less than the average effective rate. Chidambaram, after reviewing the direct tax situation on September 3, had said that the average effective corporate tax rate is 24 per cent but many industries are paying below this average.
“We will have to see whether they are tax compliant and whether within the present law, they are paying taxes that they should be paying. Even if the average goes up by two per cent, back of the envelope calculation shows that Rs 30,000 crore will come,” he had said.
The rate of corporate tax is 30 per cent
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