Certain interest rate-sensitive sectors like auto are reporting slowdown, but there does not seem to be a widespread deceleration across the sectors. Advance taxes paid by the corporate sector increased a whopping 76.8 per cent to Rs 30,399 crore in the first quarter of this financial year, against Rs 17,194 crore a year ago. The government kitty could swell further in next few days as some companies pay their dues even after the June 15 deadline.
“This indicates revenue buoyancy is robust and the profitability of companies for the first quarter has not been dented,” a finance ministry official told Business Standard.
The growth in advance tax this quarter is pretty high, considering a high base of 55.4 per cent a year ago. The country’s largest lender SBI, Reliance Industries, SAIL, LIC and Bhel lead the pack of top advance tax payers.
Advance tax collections are an indicator of financial health of companies and state of the economy. Based on their projected earnings, firms pay 15 per cent of their total advance tax in April-June. The huge growth in the first quarter may provide some comfort to the government at a time when global factors are posing a risk to the country’s economic growth and fiscal situation.
The finance ministry has indicated economic growth this year may be lower than 9 per cent projected in the Budget.
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The ministry is also keeping its purse strings tight to prevent any extra expenditure and stick to the fiscal deficit target of 4.6 per cent of GDP during 22011-12.
Yesterday, the RBI had said even as there is deceleration in some important sectors, notably interest-sensitive ones, there is no evidence of any sharp or broad-based slowdown.
Companies pay advance tax in four quarterly instalments. After the first instalment in mid-June, the remaining 30 per cent, 30 per cent and 25 per cent, comes in September, December and March.
“The estimation of profits by companies is correct most of the times. There is not much scope for under-reporting or over-reporting of profits. No one wants to pay more advance tax when the cost of borrowing is so high and if they pay less there is a penalty,” said another finance ministry official.
Gross direct tax collections of the government by the end of this month are expected to cross Rs 1,00,000 mark. The collections during these two and half months have already increased 38 per cent to Rs 99,707.8 crore, against Rs 72,269.6 crore in the same period of 2010-11.
Net direct tax collections, however, are marginally up by 1.3 per cent on account of 191.7 per cent jump in refunds. Net collections stood at Rs 59,136.7 crore as on June 16, 2011, compared with Rs 58,361.4 crore last year. Refunds increased from Rs 13,908.2 crore in 2010-11 to Rs 40,571.1 crore this year.
The finance ministry has set a target of 19.5 per cent growth in its net direct tax collections to Rs 5,33,000 crore this year. The net collections may improve in the coming months as in the first two months the tax department has given over 40 per cent of the refunds it is expecting to give this year.
The tax deducted at source (TDS) for the corporate sector has also shown a growth of 32.2 per cent in the first quarter so far, whereas TDS from personal income tax increased by 27.3 per cent.
Advance tax paid by the corporate sector had increased 22.7 per cent to Rs 1,97,244 crore in financial year 2010-11. Overall corporate tax collections had increased 24 per cent to Rs 3,37,179 crore, while income tax collections rose by 16.7 per cent to Rs 1,40,059 crore during the period.ends