Financial capital disappoints with flat direct tax collection

MUMBAI: After filing of the last tranche of advance tax by corporates, the income tax department today conceded that it will not be able to meet the targeted 20 per cent growth in collections from Mumbai, which is the single largest source of direct tax collections.

Tax mop-up from the financial capital, which contributes nearly 40 per cent of the total direct tax collection, and was set a target of Rs 2.04 trillion, is at best flat this fiscal, going by the initial numbers.

The admission comes a day ahead of the Budget, and is bad news for the struggling government that is all set to shoot its fiscal deficit target of 4.6 per cent by a wide margin of over 1 percentage point. Most analysts see the fiscal slippage at over 6 percent this fiscal.

"Tax collections cannot grow 20 per cent if the GDP grows at 7 percent, there is also a below-the-mark growth in the IIP (manufacturing output), with volatility in stock markets and high interest rates adding to the woes," a senior department official said.

The official also pointed to the under-recoveries by oil marketing companies, which have led the troika of HPCL, BPCL and IOC to pay only Rs 200 crore in taxes this year against Rs 5,000 crore last fiscal.

Similarly, factors like windfall gains arising out of single deals are also not taken into consideration while fixing targets, he said, citing Piramal Healthcare which had paid Rs 4,000 crore last year and is at "near zero" this fiscal. However, some companies, notably the country's largest software player Tata Consultancy Services which paid Rs 550 crore against Rs 200 crore last year, did put up a good show.