Corporate tax (CIT) collection grew an impressive 18.3% in April-November of FY19, the fastest pace in at least the last five years, thanks to a better compliance brought about by goods and services tax (GST), digitisation and inter-linking of various government departments leading to an efficient detection of tax evasion.
Although the earning of the listed companies in the July-September quarter has been muted, over two-third of CIT comes from unlisted companies which may have started paying more taxes as avenues of evasion has narrowed, said tax practitioners. The targetted growth for CIT in FY19 is 10.1% .
“Apart from GST, the steps taken by other government departments, including the completely online systems deployed by both the tax departments, have instilled a heightened sense of fear of apprehension among promoter-driven and unlisted firms to disclose income closer to real income,” Amit Agarwal, partner, Nangia Advisors, said.
For instance, the GST annual return requires taxpayers to provide details of the profit and loss account to the tax department, Agarwal said. Additionally, the direct tax department would also get access to information on companies’ GST payments, which could be used to tally the corporate and personal income tax paid by promoters.
Rajat Mohan, partner at AMRG & Associates, said many unlisted firms were progressively declaring truer turnover over the last two years. “In one case, a firm with a turnover of over Rs 35 crore has paid over Rs 12 lakh in taxes this year whereas it used to pay less than Rs 5 lakh routinely earlier. The firm has decided to keep increasing its tax payout every year to come as close to real liability as possible.”
On the personal income tax (PIT) front, the government net collection grew by 16% in April-November. The overall net direct collection grew by 14.7% to Rs 5.51 lakh crore, which is 48% of total budget estimate of Rs 11.5 lakh crore for the current fiscal. The growth rate required to achieve budget target is 14.4%.
“Refunds amounting to Rs 1.23 lakh crore have been issued during April to November 2018, which is 20.8% higher than refunds issued a year ago,” the government said in a statement.
It added that the collections of the corresponding period of FY18 also included extraordinary collections under the Income Declaration Scheme (IDS), 2016, amounting to Rs 10,833 crore, which do not form part of the current year’s collections.