Both corporate and income tax surveys fell 18 percent and 2.3 percent, respectively, in fiscal 2020-21, according to data from the Controller General of Accounts
The corporate tax collection fell under the income tax collection for the first time in 12 years due to lower tax rates and the impact of COVID-19 on businesses. Corporate tax collection for FY21 was Rs 4.57 lakh crore, while total income tax was Rs 4.69 lakh crore. Corporate income tax is levied on corporations or companies, while income tax is levied on the income of individuals.
Both corporate and income tax surveys fell 18 percent and 2.3 percent, respectively, in fiscal 2020-21, according to data from the Controller General of Accounts. The Modi government cut corporate tax rates by around 10 percentage points in September 2019. The new corporate tax rates for existing businesses are 25 percent, while for new manufacturing businesses they are 17 percent.
Also read: Direct tax collection of 5% to Rs 9.45 lakh cr in FY21: CBDT
Experts say lower tax rates and a decline in GDP have resulted in lower corporate tax collection. “A cut in tax rates and a fall in GDP due to the pandemic could explain the decline in corporate tax collections,” said NR Bhanumurthy, Vice Chancellor of Dr. BR Ambedkar School of Economics University in Bengaluru, across from The Print.
COVID-19 has hit India’s economy hard. The budget deficit in FY21 was 9.3 percent of GDP, while GDP contracted by -7.3 percent.
The FY21 GDP decline has been worse for more than 40 years, government data shows. The economy has shown signs of improvement compared to previous quarters, but the current COVID-19 situation in the country has forced forecasters to downgrade their GDP projections for both the fourth and first quarters of FY22.
While most analysts had forecast double-digit growth for FY22, albeit on a lower basis, the second wave of the COVID-19 pandemic and state government lockdowns to control the rise in cases have led to revisions to growth estimates. For the first quarter of 2021-22, the median forecasts by rating agencies and major economists were 21.6 percent, less than 23 percent previously forecast.
Also read: The collection of indirect taxes increases in FY21 by 12.3% to 10.7 lakh cr