The deposition of advance taxes seen a reduction to reduce decline resulting in more than 30% reduction in the Gross Tax Collections. The dip shows that the businesses have been impacted very harshly by the coronavirus lockdown.
All the companies and other “big” assesses are required to pay an advance tax to the government. The tax is to be paid in four instalments every quarter. The obligations of the first quarter are to be paid by 15th June. the officials have not made a clear statement on the collections as the assesses are still submitting the tax, but the collections received until now show that there has been a reduction in collection of tax for the first quarter and there is distress among the business owners.
The revenue of the central government, as well as the states, has reduced as states share 45% of the total collections under this head. The dip in the collection is similar to that seen in the GST collections for April and May, which are estimated to be at least 45% short of the average collection.
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The government had estimated that there will 13% increase in the direct tax collections in the new financial year, while the overall tax revenue was estimated to be 12% higher but the first quarter has shown that the gross advance tax collections have been slumped by 79%. The personal income tax is also estimated to be at least 64% lower than the average. The full picture of the collection and revenue should be clearing in one or two days.
The lockdown has disrupted the overall activity of the economy resulting in a massive decline in revenue of the government from all sources. Although the businesses have started their operations after two months of lockdown, they are not working at their full capacity. The big oil companies have seen pressure as a huge quantity of crude oil has been stocked, which was purchased at higher prices, but the decline in demand has forced them to stock.
The reduction in revenue will force the government to make some cut-backs in the spending. The target of 3.5% growth in Gross Domestic Product also looks far fetched due to the contraction in the economic activities.
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