Skip to main content

Corporate tax growth feels GST heat


The exchequer got 19.1 per cent more from direct taxes in the first four months of the current financial year (FY18), but the amount paid by companies reflected their struggle with the goods and services tax (GST). The total direct taxes after refunds grew 19.1 per cent at Rs 1.9 lakh crore between April and June this year.
Last year, during this period, it had risen 24 per cent. This isaminor deceleration, but when compared in terms of percentage of Budget Estimates (BE), the figures this time are rosier.
The collections constituted 19.5 per cent of the BE of direct taxes for FY 18.
In FY 17, they had accounted for 18.8 per cent of the BE.
What is startling, however, is the slow tax collection from corporate entities.
This year, this grew by 7.2 per cent in the AprilJuly period, sharply lower than the 11.7 per cent in the same period last year.
Experts said the slowdown could be attributed to adjustments leading to destocking and the offering of discounts by companies as the government ushered in the new indirect taxation system on July 1.
Aditi Nayar, principal economist with Icra, said gross corporation tax collections recorded slower growth, reflecting factors such as subdued volume growth in various sectors as well as the discounts offered to reduce inventories ahead of the transition to the GST.
Available indicators —such as the sequential decline in growth in non oil exports, core sector output and automobile production —suggest that industrial growth was subdued in June.
“Given the unfavourable base effect and inventory trimming prior to the onset of the GST, we expect a 1 per cent contraction in the Index of Industrial Production in June.
Subsequently, the Purchasing Managers´ Index (PMI) for manufacturing as well as services indicates a contraction in July,” she added.
While the services sector PMI plunged to a four year low in July to 45.9 points from 53.1 in June, manufacturing PMI contracted to an eight year low of 47.9 from 50.9 points.
Madan Sabnavis, chief economist with ICRA, attributed the slowing growth in corporation tax collections to destocking and discounts offered by companies.
He, however, said this would be more than compensated for by rebuilding of inventories after initial hiccups due to the GST, from the third and fourth quarters.
Nayar said higher prices of some commodities in April July, compared to the same period in 2016, might be squeezing the margins of companies in some sectors.
For instance, many businesses would be experiencing higher fuel costs, following the 8 per cent rise in the average crude oil prices.
Also, the margins of some exporters might be getting squeezed following the rupee appreciation relative to the dollar, she added.
Personal income tax collections, including the securities transaction tax (STT), were up 17.5 per cent. Growth was 31.47 per cent in the same period in FY 17.
After adjusting for refunds, net growth in corporate tax collections stood at 23.2 per cent in the period under consideration.
Similarly, personal income tax collections rose 15.7 per cent.
Growth was 46.55 per cent in April July of FY 17.
The phenomenal growth of personal income tax collections was because of a change in the rules of advance payments in FY 17.
Refunds to the tune of Rs 61,290 crore were issued in April July against Rs 64,181 crore in the corresponding period of the previous financial year.
The phenomenal growth of personal income tax collections was because of a change in the rules of advance payments in FY 17.
The Business Standard, New Delhi, 10th August 2017

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s