The slowing down of the Indian economy is showing up in multiple ways. One of them relates to the tax collection figures. As on March 31, 2020, the overall tax collections, both direct and indirect, for the financial year 2019-20 is lower than that of the previous year 2018-19.
According to an exclusive Reuters report, the targeted direct tax collection for this year is Rs 13.5 lakh crore. This figure would have been higher than 2018-19 by 17%. It is reported that so far, the actual collection is just Rs 7.3 lakh crore till January 23, 2020. This figure is less than the collection till the same date last year. The difference is as much as 5.5%. It is true that the last quarter sees a jump in the tax collections, a phenomenon observed almost each year. The question is how much of the incremental collection in this quarter can offset this 5.5% lower tax collection so far.
Senior officials are reportedly involved in the tax collection departments are not sure if the government will be able to even reach the last yearâ€™s final figures of Rs 11.5 lakh crore.
While it is not difficult to find the reasons for this steep drop in the tax collection, the more relevant question at this point in time is how the government plans to tide over this shortfall in revenue in the budget and while making provisions for expenses already committed for the year.
There was a bold move to cut down corporate tax rates that shaved off a massive Rs 1.47 lakh crore from the revenue. It was done so that the companies which save their funds from paying less tax would plough them back in their businesses in order to generate more income, jobs etc. This would then reverse the trend and the economy would grow faster. Companies may wait till the completion of the financial year, calculate their profits for the year and then see how much surplus is left with the after paying taxes at the reduced rates and it is only then that that future investments can be thought of.
The Union Budget to be presented in the Parliament on February 1 by the Finance Minister may assume added significance after this report.