Advance corporation tax collections grew 8 per cent in H1FY17 against 6 per cent last year. A moderate pick up in advance corporation tax collections suggest the sector might not witness significantly high growth in FY17, says Dilasha Seth.
If advance tax collections are an indicator, the corporate sector is still struggling even as it has seen only a slight uptick in the first half (H1) of financial year 2016-17 (FY17) compared to the corresponding period last year.
In fact, collections from three key sectors -- banks, coal and oil and gas -- have been sub-optimal. The overall direct tax collections till September 15 also showed that corporation tax collections were not at all encouraging.
Advance corporation tax collections grew 8 per cent in H1FY17 against 6 per cent last year. A moderate pick up in advance corporation tax collections suggest the sector might not witness significantly high growth in FY17.
Growth in overall corporation tax, net of refunds, has been just 4 per cent in the period, reflecting low profitability and output, besides sluggish demand in the economy. Corporation tax receipts are projected to grow around 9 per cent in FY17.
"Corporation tax collection has shown a slight pickup under advance tax compared to last year's, but collections from sectors like banking, coal, and oil and gas have been weak," said a government official.
Officials had earlier said that rising non-performing assets pulled down advance tax payments by State Bank of India by 25.9 per cent in the second quarter of FY17. The bank paid Rs 1,200 crore against Rs 1,620 crore a year ago. Private lender ICICI Bank paid Rs 1,200 crore, 20 per cent lesser than a year ago.
Advance tax is when the amount due is paid when the money is earned, rather than at the end of the financial year.
Although total advance tax collections in H1FY17 rose 12 per cent to Rs 1.6 lakh crore, against 7 per cent growth a year ago, it could be attributed to buoyant growth in personal income tax, because of the change in advance tax collection rules announced in the Budget.
Meanwhile, personal income tax has grown a stellar 40 per cent as against 11 per cent last year, because of a significantly low base and the change in rules.
Individuals had to pay 30 per cent advance tax by September 15 till the previous year, but are now required to pay 45 per cent.
Overall direct tax collections till September 15 grew 11 per cent, while they were These were projected to grow 12.64 per cent in 2016-17.
The government increased income tax compliance burden on individual tax payers by making advance tax payable from June 15 instead of September 15 earlier. Now, individuals have to estimate income tax payable for full fiscal and pay 15 per cent of that in Q1, get else pay 1 pc interest for each month of delay.
Earlier individuals were liable to pay to pay 30 per cent advance tax by September 15, 60 per cent by December 15 and full by March 15.
Central Board of Direct Taxes Chairperson Rani Singh Nair had told Business Standard in August that sometimes corporates are not too sure of their earnings at the beginning of year. "Their tax collection will be better projected after the second and third instalments," she had said after Q1 collections.
Other economic indicators also do not paint an optimistic picture of the economy. The Index of Industrial Production contracted 2.4 per cent in July, pulled down by the manufacturing sector, which contracted 3.4 per cent over the previous year. Cumulatively, it contracted by 0.2 per cent in the first four months of FY17.
India's economic growth slowed to a five-quarter low of 7.1 per cent in the Q1FY17. The numbers have come under the scanner for the disconnect with other economic indicators. The government expects gross domestic product growth to be in the range of 7 -7.75 per cent in FY17.
In FY16, while indirect taxes collections exceeded revised estimates by Rs 9,885 crore, direct tax mop up fell short by Rs 4,000 crore over RE. Indirect tax revenues stood at Rs 7.11 lakh crore and direct tax collection was Rs 7.48 lakh crore. Direct tax realisation was 7.61 per cent higher than 2014-15 receipts.
