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Tepid growth in first quarter corporation tax collection

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Corporation tax collection grew a mere 2per cent between April 1 and June 18 year- on- year, indicating sluggish economic recovery.
Corporation tax yielded Rs.55,000 crore in this period, a finance ministry official told Business Standard. Experts said poor corporation tax collection growth reflects persistently weak profitability and output, besides sluggish demand in the economy.
While direct tax collections posted a 22 per cent growth at Rs. 1.2 lakh crore, it could be attributed to buoyant growth in personal income tax because of changes in the advance tax collection rules. Of the total direct tax collection, Rs.64,000 crore came from personal income tax, representing a growth of 48 per cent.
The official said while 22 per cent growth in direct taxes was unusually high for Q1, corporation tax growth of 2 per cent was unusually low. “ Corporation tax growth in the first quarter has been unusually low. This indicates that all is still not well with the corporate side of economy,” said the official.
Although not comparable, corporation tax collections grew 10.5 per cent during April- August 2015- 16 year- on- year.
Other economic indicators also do not paint a very happy picture. The index of industrial production contracted 0.8 per cent in April, dragged by the manufacturing sector which fell 3.1 per cent over the same month in 2015.
India’s economy grew 7.6 per cent in 2015- 16 from 7.2 per cent in the previous year, outpacing China. However, the numbers have come under a scanner for disconnect with other economic indicators. The government expects gross domestic product to be in the range of 7- 7.75 per cent in the current financial year.
“The tepid 2 per cent corporation tax collection growth indicates that volume growth remains weak, corporate profitability numbers are yet to pick up and demand remains sluggish,” said Soumya Kanti Ghosh, chief economic advisor, State Bank of India.
Business Standard New Delhi, 29th April 2016

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