As tax collections lag, finance ministry asks taxmen to crack down on tax evasion

Direct tax collections in the first eight months of the fiscal year was at only 42% of the full year target.

Representational Image | Bloomberg

New Delhi: With tax collections lagging budgeted targets by a substantial margin, the finance ministry has directed tax authorities to step up enforcement, recover past dues and bring in greater coordination between the direct and indirect tax arms to catch evaders.

Revenue Secretary Ajay Bhushan Pandey held a review meeting with senior officials of both the Central Board of Direct Taxes (CBDT) and Central Board of Indirect Taxes and Customs (CBIC) on 16 December to discuss measures to step up revenue collections in the remaining few months of the current fiscal year.

It comes at a time the government is struggling to meet its budgeted tax collections as a sharp fall in economic growth has adversely impacted corporate earnings and turnover. This has seen both corporate tax collections and goods and services tax (GST) collections growing at a much slower pace than envisaged. It may see the fiscal deficit target overshooting the budgeted 3.3 per cent of the gross domestic product.

Net direct tax collections in the April-November period were at Rs 5.56 lakh crore, only around 42 per cent of the full year budgeted targets of Rs 13.35 lakh crore.

GST collections are faring marginally better but still short of targets. Until November-end, the government had collected around Rs 3 lakh crore in central GST revenues, which is only 58 per cent of the budgeted full-year target of Rs 5.26 lakh crore. Compensation cess, collected by the union government and shared with the states, was at Rs 63,194 crore as of November-end, 58 per cent of the full-year target of Rs 1.09 lakh crore.

Govt working on augmenting tax collections

A source in the tax department said various steps were discussed in the meeting to augment tax collections. This includes taking strict measures against non-filers of GST returns including blocking of e-way bills and input tax credit and cancellation of registrations. The GST return data will be shared with the income tax department to check for instances of under-declaration of turnover data and income tax is detected.

The income tax department has also been asked to conduct a drive to recover past arrears in the next three months.

Senior officials have been instructed to conduct field visits but without troubling tax payers, the official added. CBIC has been given a target to collect a total of Rs 4.55 lakh crore in the four months between December to March.

The GST council is scheduled to meet Wednesday to discuss ways to increase tax collections, including a possible increase in tax rates and cess on items. The meeting comes at a time that cess collections have been inadequate to compensate states for the shortfall in revenue collections leading to delayed payments by the centre to the states.

GST law has a provision that says states will be compensated for five years for any revenue losses incurred on account of transition to GST through compensation cess levied on sin and demerit goods like cigarettes, aerated drinks and luxury cars.

Further, the finance ministry has asked direct tax officials to try to meet the Rs 13.5 lakh crore target despite the reduction in corporate tax rates announced earlier this year. The government is expected to scale down its budgeted direct tax targets in the revised estimates to be presented in the budget by at least Rs 1.5 lakh crore.