Current AffairsIndia

Fin Min claims fall in direct taxes temporary; historic tax reforms being undertaken

New Delhi: The Finance Ministry on Sunday dismissed news reports of a steep drop in direct tax collection for FY 2019-20 and negative buoyancy of the direct tax collection as compared to GDP growth, saying it was ‘temporary’ and due to the ‘historic’ tax reforms being undertaken by the government.

Stating that these news reports do not portray the correct picture regarding the growth of direct taxes, the Ministry said in a statement here that it was a fact that the net direct tax collection for FY 2019-20 was less than the net direct tax collection for FY 2018-19, but this was ‘on expected lines and is temporary in nature due to the historic tax reforms undertaken and much higher refunds issued during the FY 2019-20’.

It said gross collection (removing anomalies created by the variation in the amount of refund given in a year), after taking into account the revenue foregone estimated for the bold tax reforms undertaken, have a direct impact on the direct taxes collection for FY 2019-20.

In FY 2019-20, the amount of total refunds given was Rs 1.84 lakh crore, compared to Rs 1.61 lakh crore in FY 2018-19, which was a 14 per cent increase year-on-year.

On reduction in corporate tax rate for all existing domestic companies, it claimed that in order to promote growth and investment, the government has brought in a ‘historic tax reform through the Taxation Laws (Amendment) Ordinance, 2019, which provided a concessional tax regime of 22 per cent for all existing domestic companies from FY 2019-20, if they do not avail any specified exemption or incentive’.

‘Further, such companies have also been exempted from payment of Minimum Alternate Tax (MAT).”
It estimated the revenue impact of these reforms at Rs 1.45 lakh crore for Corporate Tax and at Rs 23,200 crore for the Personal Income Tax (PIT).

‘By removing the effect of the extraordinary and historic tax reform measures and higher issuance of refunds during the FY 2019-20, the buoyancy of total gross direct tax collection comes to 1.12 and almost one for Corporate Tax and 1.32 for Personal Income Tax,’ it added.

These buoyancies indicate that the growth trajectories of both the arms of direct taxes, that is, Corporate Tax and PIT are intact and are rising steadily.

Further, the higher growth rate in direct taxes, as compared to growth rate in the GDP, even in these challenging times, proves that recent efforts for the widening of tax base undertaken by the Government are yielding results.

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