Economic Depression: Growth in direct tax collection worries about slowing government

New delhi date. 26 October 2019, Saturday

By the middle of October of the current fiscal year, the growth in the direct tax collection of the government has slowed, increasing the concern of the government, which is 8.5 percent compared to the same period last year. In the current financial year, direct tax collection is targeted at a growth rate of 8.5%.

There are several reasons why growth is slow. Apart from the economic downturn, this situation has been seen as a result of the decline in corporate taxes. In order to achieve the budget estimate, it is necessary to increase the recovery by 5% for the remainder of the current fiscal year. Due to the economic downturn, revenue from the government's GST has also slowed. September's GST collections were down 8% year-on-year to a six-month low.

In the first two and a half months of the financial year, corporate tax revenues increased by only 5.5 percent. Given the sluggish economic situation, the recovery target seems to be impractical from the beginning. The reduction in corporate tax rates will still affect the tax collection target.

Keeping in view the economic downturn in the country, Finance Minister Nirmala Sitaram has reduced corporate tax rate from 5% to 5%. In combination with surcharges and cess, the effective rate has dropped from 5 percent to 8.5 percent.

The government's decision to reduce corporate taxes is exactly the same as the budget cut from the July budget. In the budget, the target is to keep the central government's fiscal deficit limited to 8.5 percent.

Analysts believe the central government is likely to beat the fiscal deficit target by a margin of 8.5%.