The Hindu Business Line : Shortfall likely in direct tax collection this fiscal

THE Government has conceded that the current trend in collection of direct taxes issuggestive of a shortfall vis-à-vis the Budget estimates for 2005-06, which had been pegged at about Rs 1,80,000 crore.

The direct tax collections up to January 31 stood at Rs 1,09,831 crore. The Government has cited three main reasons for the shortfall in direct tax collections.

They are lower payment of advance tax by certain sectors including petroleum, banking, insurance, and telecom; heavy rains and floods in various parts of the country including Maharashtra, Gujarat, and Tamil Nadu, and grant of exemption to small exporters with respect to profits on sale of duty entitlement passbook (DEPB) credits and deferment of taxes in cases of non-exempt exporters over five years.

While high crude oil prices and less-than-expected demand growth for petroleum products has impacted advance tax payments of the petroleum sector, the banking sector had to make do with lower-than-anticipated profitability growth.

Against a Budget estimate of Rs 66,239 crore personal income tax, the Centre had till January 31 collected about Rs 44,491 crore (35 per cent increase over the same period last year).

In the corporation tax front, collections stood at Rs 65,094 crore (21 per cent increase); the Budget estimate is Rs 1,10,573 crore for the current fiscal.

As far as indirect taxes are concerned, the Government has said that the Budget estimates of indirect tax for 2005-06, which has been pegged at Rs 1,92,215 crore, are likely to be achieved if the current over-all growth rate of indirect tax revenue collection continues for the remaining months of the fiscal.

Indirect tax collections grew by 16.2 per cent till January to touch Rs 1,53,988 crore (Rs 1,32,501 crore).

For 2005-06, the gross indirect tax collections had been Budgeted at Rs 1,92,215 crore (revised estimate of Rs 1,71,390 crore for 2004-05).

In a written reply to Parliament, the Minister of State for Finance, Mr S.S. Palanimanickam, has outlined the steps that are being taken by the Government to minimise the shortfall of direct tax collections.

These include completion of assessment in large-demand cases and collection of demand, persuading taxpayers to pay higher amounts under advance tax in cases where huge self-assessment tax has been paid, and monitoring of advance tax payments of the large taxpayers with a view to ensuring that there is no under-payment of the March 2006 instalment of advance tax.

Meanwhile, the Government has also said that the expert group constituted to rewrite the income tax law is required to submit its report by April 30, 2006.