Corporation tax mop-up slips 14%; total tax collection in Q1 rises 3.38%

Excise duty mop-up falls 15%

Collections from the corporation tax declined nearly 14 per cent year-on-year (YoY) to Rs 1.38 trillion in the first quarter of this financial year (Q1FY24), from Rs 1.61 trillion, despite signs of economic recovery. The revenue under this head had risen almost 30 per cent YoY in the first three months of 2022-23.

The decline in the corporation tax mop-up was in line with that in excise duty receipts. This, however, contrasted the revenue trend concerning personal income tax (PIT), goods and services tax (GST), and Customs duty.

Overall, there was a 3.38 per cent rise in total tax collection at Rs 6.72 trillion in the first quarter of the current fiscal year, against Rs 6.50 trillion in the corresponding period of FY23. This was much lower than the 22.18 per cent rise in total tax collection in the first quarter of 2022-23.

Experts attributed the decline in corporation tax receipts to low profit reported by higher tax-paying oil and information technology companies because of falling commodity prices and subdued external demand.

 The rate of year-on-year decline has been coming down after April. For instance, there was a decline of 32 per cent in the corporation tax collection to Rs 38,751 crore in April this year, from Rs 56,720 crore in the same month last year. The YoY decline was less in May at 17.63 per cent; the mop-up was Rs 17,960 crore versus Rs 21,805 crore a year ago. This further came down to just a 0.39 per cent fall in June this year when the collection was Rs 81,972 crore as against Rs 82,297 crore in the third month of FY 23, showed figures released by the Controller General of Accounts (CGA) on Monday.

The decline in June was less due to the advance tax collection. Advance corporation tax mop-up rose 17.68 per cent to Rs 92,784 crore until June 17 of FY24, as against Rs 78,842 crore until June 16 of FY23, according to the figures released by the finance ministry earlier. Most advance taxes were paid in June.

Bank of Baroda Chief Economist Madan Sabnavis said profit growth in some higher tax-paying industries, such as oil and IT, was low in the first quarter of FY24. “This could be the reason,” he said.  For instance, Reliance Industries reported around 11 per cent fall in its net profit during Q1FY24, while Infosys recorded only an 11 per cent rise in profit during the period, against analyst expectations of 14-18 per cent growth.

The sectors that gained last year due to high commodity prices will see a moderation this year, Sabnavis said.

Besides corporation tax, Union excise duty yielded lower collection — down 15.38 per cent at Rs 51,813 crore — in the first quarter of FY24, against a Rs 61,228 crore mop-up in the corresponding period of the previous year. This may be due to a reduction in windfall tax on crude and other fuels.

 However, the government raised windfall tax on crude oil in July and August. It first raised the tax on petroleum crude to Rs 1,600 per tonne from zero. Now, it has been hiked to Rs 4,250 per tonne (from August 1, 2023). The government also hiked the tax on diesel to Rs 1 per litre from nil earlier.

The Union excise duty mop-up declined almost 10 per cent during the first three months of 2022-23, as well. On the other hand, personal income tax yielded almost 11 per cent higher revenue to the government at Rs 1.92 trillion in Q1, against Rs 1.73 trillion Q1FY23.

The collection of central goods and services tax was up 15 per cent YoY to Rs 2.06 trillion, from Rs 1.79 trillion. Customs duty receipts rose almost 35 per cent to Rs 49,201 crore in Q1FY24, from Rs 36,467 crore a year ago.