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Direct tax collection grows 8% at Rs 1,67,000 crore

Last Updated 06 September 2015, 19:07 IST
The Centre’s indirect tax collection so far may have been better, but the future looks bleak for direct tax collections. The direct tax collection grew 8 per cent so far in 2015-16, touching Rs 1,67,000 crore.

The government had budgeted the direct tax collection target at Rs 7.98 lakh crore for the current financial year, which was based on the assumption that the economy would grow at 8-8.5 per cent. But the gross domestic product (GDP) growth has slowed to 7 per cent in the first quarter (April-June) period.

To meet the full year target of 7.98 lakh crore, the direct tax collection needs to grow by at least 13 per cent for the rest of the year.

Analysts, however, say that if the pace of overall economic growth does not pick up, it will be difficult for tax revenue to grow.

Corporate tax collection grew 10.5 per cent, while personal income tax collections increased 4 per cent in the five-month period from April to August this year.

Concerned over the slower growth in direct tax collection, Minister of State for Finance Jayant Sinha had recently said that India needed a more balanced tax structure with more direct taxes.

“Indirect taxes are regressive and we want to move towards direct taxes. We need to have a more balanced tax structure because indirect taxes hurt the poor,” he said.

The contribution of direct taxes is significant to raise the tax-to-GDP ratio in the country. Currently, India’s tax-to-GDP ration is only 10 per cent.

Indirect tax collections, however, have grown over 37 per cent mainly due to a jump in excise duty collection especially on transport fuels.

The excise duty collection has been budgeted to grow at 21.7 per cent in the current financial year, but it has grown 81 per cent during the first quarter.

A ramp-up of direct tax collection is also significant because from November this year, the base effect of increase in excise duty will begin to wear off. In that case, the direct tax collections will not remain as robust.

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(Published 06 September 2015, 19:07 IST)

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