Govt sees fall in direct tax collection in 20 years: report

The fall in direct taxes was due to businesses being affected by decline in demand

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The corporate and income tax collection for the current year is likely to witness a fall for the first time in 20 years, a Reuters report said, quoting senior tax officials.

Direct taxes typically account for about 80 per cent of the government's projections for annual revenue.

The fall in direct taxes was due to businesses being affected by decline in demand, forcing them to reduce investments and cut jobs, leading to a dent in tax collections. Another reason for the fall was the cut in the headline corporate tax rate last year which was aimed at wooing manufacturers and boosting investment.

This fall in tax collection has prompted the government to forecast a five per cent growth for the fiscal year, which is the slowest in 11 years, said the Reuters report.

The Union government had set a direct tax collection target of Rs.13.5 trillion for the year ending March 31. This is a 17 per cent increase compared to the last fiscal year.

As of January 23, the tax department has collected only Rs 7.3 trillion, which is more than 5.5 per cent below the amount that was collected during the same period last year.

Senior tax officials told Reuters that direct tax collections this financial year were likely to fall below the Rs 11.5 trillion collected in 2018-19. An official said this is the first time that they see a fall in direct tax collection. According to the official, direct tax collections for this year could end up roughly 10 per cent below the last fiscal.