Corporate Advance Tax Collection Drops Over 5% in Dec Quarter

Corporate Advance Tax Collection Drops Over 5% in Dec Quarter

This fiscal year saw a drop in the collection of advance tax paid by companies by a margin of 5.2% in the October- December quarter. The personal income tax however saw a marginal growth, thereby making it difficult for the government to cut income taxes at this point. The reason for the drop in advance corporate tax have been pin pointed to sources like the slowdown of the economy, tax rate overhaul and the interest rate cuts by the Central government. The advance corporation tax collection fell to 73000Cr in the third quarter as compared to the previous high of 77000Crs, last fiscal year. The personal income tax paid in advance, however grew to 33000cr as compared to the 24000Cr mark during the same time last fiscal year (FY 19). Direct tax collection and net of refunds has been seen to be growing only at a rate of 0.7% till December 15.

The target set for FY20 is that of 13.35 trillion INR as stated by government sources. The gross direct tax collection had touched 8.34 trillion as compared to the 7.96 trillion achieved last year. Net tax collection had a marginal growth to reach 6.75 trillion INR as compared to 6.7 trillion last fiscal year. Growth in refunds showed a significant increase of 26.6% as well.

Although the collection figures state that there is no need for cuts in the direct tax collection target, it is still disturbing that the Centre’s fiscal deficit has crossed the target for 2019-20 by 2.4% in October itself.

The gross tax collection target has seen a significant growth by a margin of 4.8% with 8.34 trillion INR achieved in FY 20 as compared to the target of 7.96 trillion which was achieved in FY19. Refunds saw a tremendous growth of 26.6% by attaining a benchmark of 1.58 trillion INR in FY 20 (to date). As compared to the 1.25 trillion mark achieved in FY 19.Sources have also sited that the overall revenue mobilization was facing heat. The government had earlier reduced the corporation tax rate for existing and newly incorporated companies to 25% and 15% respectively. Many companies however, have not yet taken a call on the new rate structure.

In the meanwhile the Reserve Bank of India (RBI) has lowered the repo rate at which commercial banks borrow from it by a cumulative 135bps to 5.15%. This is the lowest rate in the past 9 years. The change in lending rates helps companies borrow more for their investments, consumption and overall growth and production. As per the government's official data which was released last week, the country’s GDP growth in July-September quarter of 2019-20 had slowed to a 26 quarter low of 4.5%.