India faces first fall in direct taxes in at least 2 decades
Mumbai: India's corporate and income tax collection for the current year is likely to fall for the first time in at least two decades, over half a dozen senior tax officials opined, amid a sharp fall in economic growth and cut in corporate tax rates.
Prime Minister Narendra Modi's government was targeting direct tax collection of Rs 13.5 trillion ($189 billion) for the year ending March 31 — a 17 per cent increase over the prior fiscal year.
However, a sharp decline in demand has stung businesses, forcing companies to cut investment and jobs, denting tax collections and prompting the government to forecast 5 per cent growth for this fiscal year — the slowest in 11 years.
The tax department had managed to collect only Rs 7.3 trillion as of January 23, more than 5.5 per cent below the amount collected by the same point last year, said a senior tax official.
After collecting taxes from companies in advance for the first three quarters, officials typically garner about 30-35 per cent of annual direct taxes in the final three months, data from the past three years shows.
Some senior tax officials added that despite their best efforts direct tax collections this financial year were likely to fall below the 11.5 trillion collected in 2018-19.
"Forget the target. This will be the first time that we'll see a fall in direct tax collection ever," said a tax official in New Delhi. Meanwhile, International Monetary Fund (IMF) chief Kristalina Georgieva on Friday said growth slowdown in India appears to be temporary and she expects the momentum to improve going ahead.
Speaking at the World Economic Forum 2020 in Davos, she also said the world appears a better place in January 2020 compared to what it was when IMF announced its World Economic Outlook in October 2019.
She said the factors driving this positive momentum include receding trade tension after the US-China first phase trade deal and synchronised tax cuts, among others. She, however, said a growth rate of 3.3 per cent is not fantastic for the world economy.
"It is still sluggish growth. We want fiscal policies to be more aggressive and we want structural reforms and more dynamism," the managing director of the IMF said.
With agency inputs
