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The tax authorities are faced with a steep revenue collection target for 2019-20, with advance tax mop-up posting dismal growth in the first half of the financial year, indicating a deepening economic slowdown.
The overall advance tax collection, including corporate and personal income tax, grew by 6 per cent between April and mid-September as against 18 per cent in the year-ago period, according to sources in the know.
Direct tax collection has seen a growth rate of mere 5 per cent so far this year, which means that collections will need to expand by at least 27 per cent in the remaining half to achieve the Budget target of 17.3 per cent growth.
Advance tax collection after the second instalment stood at Rs 2.2 trillion. The gross direct tax collection has touched Rs 5.5 trillion as against the full-year target of Rs 13.35 trillion.
Within the advance tax collection, corporation tax mop-up grew by 6.5 per cent and personal income tax by 3.5 per cent.
“The revenue situation remains grim on account of the economy expanding slower than expected and key industries being impacted. If the situation does not improve, meeting the collection target will be impossible,” said a government official.
India’s gross domestic product (GDP) growth plummeted to a 25-quarter low of 5 per cent in the first quarter of FY20.
The tax buoyancy estimated this year at 1.44 is higher than 1.21 achieved last year. In simple terms, it means if nominal GDP expands by 10 per cent, direct tax collection will grow by 14.4 per cent, which appears near impossible in the current situation. Nominal GDP grew by just 8 per cent in the first quarter as against 12 per cent budgeted for FY20. Several institutions, including the International Monetary Fund (IMF) and the Reserve Bank of India (RBI), have cut India’s growth forecast.