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Direct tax collection contracts in April-Feb period, Rs 3.5 lakh crore now needed in March

A slowdown in economic activity is likely to further hit collections. Modi govt is banking on positive response to dispute resolution scheme to meet targets.

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New Delhi: India’s direct tax collection contracted 3.5 per cent in the April-February period in 2019-20, the Narendra Modi government informed Parliament Monday. The fall leaves the government with an uphill task of collecting over Rs 3.5 lakh crore in March to meet the revised estimates in the budget.

In the 11-month period in 2019-20, net direct tax collection was at Rs 8.13 lakh crore as against Rs 8.43 lakh crore in the corresponding year-ago period, the finance ministry said in response to a question in the Lok Sabha.

The tax collection numbers along with a further slowdown in economic activity, especially in service sectors like travel and hospitality, mean that the government is likely to fall well short of even the revised budget estimates.

The government had lowered both the direct and indirect tax estimates for 2019-20 in February from the initial estimates presented in July last year. Of this, while direct tax collection target was revised downwards by more than Rs 1.5 lakh crore, collection from the goods and services tax was revised downwards by more than Rs 50,000 crore.

But despite the revision, the collection in the first 11 months indicates that the government will have to collect nearly a third — Rs 3.56 lakh crore, or 30.4 per cent — of the full-year target — Rs 11.7 lakh crore — in the month of March if it has to meet the revised target.

The Indian economy is expected to grow at 5 per cent in the current fiscal, from 6.1 per cent a year ago. The slowdown has adversely impacted corporate profits and consequently corporate tax collection. Most of the downward revision in the direct tax targets was on account of lowering of corporate tax collection targets.

‘Vivad Se Vishwas’ promise

The Modi government is banking on the ‘Vivad Se Vishwas’ plan, a dispute resolution scheme, which received Parliament’s approval last week to boost direct tax collection this fiscal and help meet the tax collection targets.

The bill to implement the scheme is awaiting the President’s nod.

It proposes to give taxpayers an opportunity to end their dispute with the tax department by depositing a specified amount by 31 March. Taxpayers could opt for depositing the money after 31 March also but with a comparatively higher tax payout.

Also read: Modi govt shows no urgency to reform financial sector even after biggest bank failure


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