Advance corporation tax mop-up drops over 5% in Dec quarter to Rs 73,000 cr

Net collection grows only 0.7% to Rs 6.75 trillion

The collection of advance tax paid by companies fell 5.2 per cent in the October-December quarter of this fiscal year while the mop-up of personal income tax saw marginal growth, which may make it difficult for the government to cut income-tax rates now. Sources attributed the drop in corporate advance tax to the slowdown in the economy and reduction in tax rates. 

Advance corporation tax collection fell to Rs 73,000 crore in the third quarter compared with Rs 77,000 crore a year ago while personal income tax paid in advance rose to Rs 33,000 crore against Rs 24,000 crore over this period in FY19.

Direct tax collection, net of refunds, has seen a growth rate of merely 0.7 per cent till December 15. The year’s overall target is Rs 13.35 trillion. 

Advance tax collection after the third instalment stood at Rs 2.51 trillion compared with Rs 2.47 trillion in the corresponding period last year. 

“Gross direct tax collection has touched Rs 8.34 trillion to date compared with Rs 7.96 trillion in the same period last year. Net tax collection is around Rs 6.75 trillion as compared with Rs 6.7 trillion in the same period last year,” a government source said.

On the other hand, growth in refunds showed increased 26.6 per cent compared with that in the same period last year. 

The collection figures state there is a need for cuts in direct tax collection targets at least for the corporate sector. It is also disturbing because the Centre’s fiscal deficit has crossed the target for 2019-20 by 2.4 per cent by October itself.

“Overall revenue mobilisation is facing heat. We have yet to do concrete analysis of the slowdown but it is difficult to say that it is only because of the rate cuts. Other factors such as the stimulus package, especially on the tax side, have played a significant role in this,” said a source cited above.  

The government reduced the corporation tax rate for existing and newly incorporated companies to 25 per cent and 15 per cent, respectively, in late September, after the September 15 deadline for advance tax payment was over. However, many companies have not yet taken a call on the new rate structure.

The official data released by the government showed the country’s gross domestic product (GDP) growth in the July-September quarter of 2019-20 slowed to a 26-quarter low of 4.5 per cent.

About 45 per cent of collection comes from advance tax and the rest from TDS (tax deduction at source) and others.

Advance tax is filed by the 15th of the third month of every quarter. Assessees falling within the ambit of advance tax payment are required to pay 15 per cent of the calculated tax liability in the first quarter, 25 per cent in the second, and the rest in equal instalments in the remainder of the year.