The net collection of direct taxes for the financial year 2019-20 came lower than that of the previous year, but the fall was “on expected lines and is temporary in nature”, the Central Body of Direct Taxes (CBDT), said in a press note released on Sunday. The note suggested that the net collection has come at a lower level due to higher tax refunds and reforms such as lowering of corporate tax rates, income tax exemption for individuals earning up to Rs 5 lakh and increase in standard deduction. CBDT goes on to add that the buoyancy in collection of direct taxes, which consist of corporate taxes and personal income taxes, has remained positive in 2019-20, resulting in increase in the gross tax collection as compared to 2018-19.
“By removing the effect of the extraordinary and historic tax reforms 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 1 for corporate tax and 1.32 for Personal Income Tax,” the note said.
CBDT’s note also said that Rs 1.84 lakh crore was given as refunds in the 2019-20, as compared to Rs 1.61 lakh crore in 2018-19, an increase of 14 per cent. Apart from this, the lowering of corporate tax rates and exemptions in the income tax structure has impacted revenue collection by Rs 1.45 lakh crore and Rs 23,200 crore, respectively, the note said.
The release also denied that investments have not picked up in spite of the tax reforms. Terming such assertions as “without appreciation of the reality of business world”, the release noted, “The setting up of new manufacturing facilities requires various preliminary steps like acquisition of land, construction of factory sheds, setting up of offices and other infrastructures, etc. These activities cannot be completed in just few months and the manufacturing plants cannot start manufacturing goods from the next day of the announcement of reforms. The tax reforms are announced in September, 2019 and the results are expected to be visible in next few months and in years to come.”