With direct tax collection growing at a slower pace of 9 per cent this fiscal so far, the government is likely to miss its revenue target for fiscal 2011-12.
According to data released by the finance ministry on Wednesday, net direct tax collections between April and January rose 9.28 per cent to Rs 3.46 trillion, mainly on account of higher realization of personal income tax and corporate tax.
Despite this, the government is likely to miss its full year target of Rs 5.32 trillion, which was based on an estimated growth of 19 per cent over the last year.
Net direct tax collection for the period in review is Rs 3.17 trillion, while gross direct tax collected was Rs 4.25 trillion, up 14.57 per cent from the Rs 3.71 trillion in the corresponding period last fiscal .
The slower growth in direct tax collection comes on the back of declining GDP growth rate, estimated at 6.9 per cent for FY-12, down from 8.4 per cent in the two previous fiscals.
Revenue collections have taken a hit due to a slowdown in industrial activity because of global factors and high domestic interest rates.
According to the official data, gross corporate tax was up 12 per cent at Rs 2.85 trillion in April-January from Rs 2.55 trillion in same period last fiscal.
Personal income tax collection for the same period in the current fiscal was up by 20.43 per cent at Rs 1.38 lakh crore.
The growth in wealth tax was 45.11 per cent at Rs 682 crore against Rs 470 crore collected last year.
Given the volatility that prevailed in the stock market for most of the current fiscal , the securities transaction tax (STT) declined by 27.19 per cent to Rs 4,145 crore. The STT mop-up was Rs 5,693 crore in the year-ago period.
With only two months of the current fiscal remaining, the government will have to add Rs 1.86 lakh crore to its tax kitty to meet its budget estimates, which experts say is a tough task.
Finance Minister Pranab Mukherjee said last week that he is exerting pressure on revenue officials to improve tax realisation to meet the total tax (direct + indirect) collection target of Rs 9.32 trillion.
"I am putting pressure on my colleagues in the CBEC, CBDT...and on my behalf Secretary (Revenue) is continuously breathing (down) their neck to improve revenue because our demand and requirement is much more," he had said.
The government needs all the revenue it can to contain the widening fiscal deficit, which is likely to only increase in the coming fiscal due to higher subsidy bill and poor disinvestment receipts. The government had projected the fiscal deficit at 4.6 per cent of the GDP in 2011-12, which it now seems unlikely to meet.
The government’s rising fiscal deficit has been flagged as an issue of concern by Reserve Bank of India and credit rating agencies like S&P. If tax revenue receipts are lower, it will put an additional burden on the deficit that India cannot afford.
Analysts say that India needs more investment in infrastructure and low tax revenue would hurt the country’s ability to invest. Additionally, the government will not be able to take decisive action to allocate more resources in case of a further slowdown in the economy. In case it decides to borrow more to cover its bills, it will raise the likelihood of higher inflation.
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