Direct tax mopup tops target, signals revival
Apr 03 2014 , New Delhi
To help meet goal of 4.6% fiscal deficit
Income-tax authorities have mopped up Rs 6.37 lakh crore against the budgeted Rs 6.36 lakh crore, according to finance ministry numbers available with Financial Chronicle. Of this, corporate tax accounted for Rs 3.92 lakh crore and personal income tax Rs 2.35 lakh crore.
Higher wealth tax collections too contributed to surpassing the target.
Last year, tax authorities mopped up Rs 5.58 lakh crore in direct taxes, including Rs 3.56 lakh crore in corporate tax, Rs 2.01 lakh crore in income-tax and the rest in wealth tax.
The record collection this time indicates signs of healthy revival in corporate activity and growth in company bottomlines in the last quarter of the fiscal in what was otherwise a year of slowing corporate growth. It also endorses the ADB's recent observation that the economic slowdown has bottomed out.
The mop-up will help Chidambaram meet his redline for fiscal deficit at 4.6 per cent of GDP in 2013-14. It might also encourage the finance minister against resorting to large-scale deferment of government expenditure to the first quarter of new financial year, starting April 1, finance ministry officials privy to the development told this newspaper.
"I think there is message in direct tax collections being good, particularly after the discouraging mop-ups in the second and third quarters. This should mean that the fourth quarter collections have been very good," Deloitte's chief economist Anis Chakravarthi said.
There was a significant spurt in government expenses in the April-June quarter of the last fiscal, with Chidambaram rolling over significant sums, including subsidies, to check the rising fiscal deficit. He may not resort to large-scale withholding of government payments for the fiscal year just ended on March 31.
"This augurs well for the fiscal health of the economy," Chakravarthi said.
The robust corporate tax collections in fourth quarter also implies higher payout of advance tax, because of higher profits, and a reversal of industrial slowdown as suggested by the latest 4.5 per cent growth for eight core sector industries in February that account for nearly 40 per cent of industrial output.
The HSBC India corporate output index released on Thursday reveals that private sector output fell in March after a fractional increase in the previous month amid moderation in domestic demand.
The HSBC index, which maps both services and manufacturing declined from 50.3 in February to 48.9 in March as manufacturing production growth eased and service sector activity fell at faster rate during the month. A PMI reading above 50 indicated growth. Less than 50 meant contraction.
According to the HSBC survey, the weaker client demand that led to a
slight fall in the index was partly due to Lok Sabha elections.
Looking ahead, growth is expected to pick up gradually after the
elections in the second of half of this year, it said.
R K Tewari, chairman of central board of direct taxes, said on March
24, he was confident of achieving the revised target of Rs 6.36 lakh
crore collections despite the shortfall of Rs 45,800 crore at that
time. The government expected to collect a little more exceeding the
target to that extent.
There was sharp increase in benchmark indices, Sensex and Nifty in the
past two months on better economic performance raising hopes of a new
business-friendly government in May. The new government is expected to
eventually kick start the investment cycle, building on the current
The BSE benchmark Sensex has gained 6.32 per cent so far this year;
NSE's Nifty is up 6.85 per cent.
Both ADB and Reserve Bank of India have forecast modest recovery in
the GDP growth rate to 5.5 per cent this fiscal from the projected 4.9
per cent in 2013-14. Exceeding the revenue collection target for
2013-14 will help pump prime the economy to an extent. Indirect tax
collections, including excise collections will also provide some clue
on industrial recovery. Those figures are yet to be released.