Centre may take Rs 6,000 cr tax hit

Direct tax mop-up slips due to lower payment by PSUs.

The Centre may end the fiscal year with a shortfall of around Rs 6,000 crore in direct tax collection mainly on account of lower payments by public sector companies and slower growth in income tax collection.

The PSUs will be the big party spoilers on current trends. Oil marketing companies Hindustan Petroleum and Bharat Petroleum have not paid their second and third instalments of advance tax, while Indian Oil paid Rs 70 crore in December and Rs 30 crore in the second instalment.

The oil marketing companies have been burdened with under-recoveries on the sale of petroleum products.

Similarly, Oil & Natural Gas Corporation paid Rs 300 crore less in advance tax in December than last year. This takes its total payout to Rs 4,800 crore, which is at the same as last year.

The revenue department was hoping for an increase of at least 30 per cent in tax payments by ONGC, factoring in higher prices of crude oil. The PSU, which is the country's largest tax payer, however, suffered a setback when a Bombay High platform was devastated by a fire earlier this year.

The problem is not confined to oil PSUs. Bharat Sanchar Nigam Ltd and Mahanagar Telephone Nigam Ltd had also paid less in advance tax than they did last year, officials said.

While figures were not available, officials said the companies were allowed higher deductions under Section 80IA of the Income Tax Act. Besides, their bottom lines were also affected by a steep fall in tariffs.

State-owned banks, too, followed suit because of lower treasury income from trading in government securities. "Most private banks have actually paid more but the bigger private sector banks like State Bank of India have paid less than what they paid last year," said an official in the tax department.

According to estimates for the period between April and December 20, 2005, the government's corporation tax collections went up 25.6 per cent to Rs 56,540 crore, against Rs 45,000 crore during the corresponding period last year.

It has, however, budgeted for an increase of 33.2 per cent in this segment.

The government usually receives 70 per cent of its corporation tax by December. "We will need a spectacular growth performance in the last quarter to achieve the target," said an official.

In case of personal income tax, the collections have increased over 20 per cent to Rs 38,170 crore. But officials are again skeptical about achieving the target of Rs 66,239 crore, which will mean a growth of over 30 per cent during the year.

Also, new taxes like fringe benefit tax were expected to generate more revenue. So far, the government has mopped up Rs 1,740 crore through the new levy.

"There is more scope to meet the target on personal income tax since 40 per cent of the tax are to be paid in the last quarter," said an official.