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Issue in direct tax collections & Tax returns filed - Today Current Affairs Topics

A Look At Tax Collections


What is the issue?
  • Widening tax net and increased tax collections are achievements of the recent government initiatives.
  • However, declining non-individual returns and rising cost of collections call for a closer examination.
What are the recent developments?
  • Various policy measures have ensured bringing more people under the direct tax net in the recent past.
  • The number of tax returns filed recently went up by about 24.6 per cent.
  • The latest direct tax collections were marginally higher than that presented in the Revised Estimates in the last Budget.
  • Personal income tax collections rose by 21 %, compared to 8% in the previous year.
  • Corporation tax collections rose by 7%, compared to 6% in the previous year.
  • Indirect tax net is also getting wider because of a rise in the number of entities getting registered under the goods and services tax (GST).
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What are the points to be noted?
  • While individual tax returns went up, returns filed by non-individuals saw a drop of about 10 per cent during the same period.
  • This includes firms, companies, associations of persons, bodies of individuals and Hindu undivided families.
  • The drop could be due to -
  1. the crackdown on shady or non-operating companies, used largely for engaging in questionable transactions in post-demonetisation phase.
  2. the cancellation of over a million duplicate or multiple permanent account numbers has excluded a larger portion of the earlier tax filing firms.
  • States like Haryana, Karnataka, Tamil Nadu, West Bengal, Gujarat accounted for a considerable rise in tax collection in the post-demonetisation phase.
  • However, states like Maharashtra's and Delhi's growth in collections are much lower in percentage in comparison to the states above.
  • This is despite the fact that the two states together account for almost half of the country’s total direct tax collections.
  • Tax deduction at source and advance taxes as a share of total direct tax receipts of the Centre raises the question on the increased cost of collections.
What is to be done?
  • Government has to analyse deeper into the reasons for 10 per cent drop in filing of returns by non-individuals and the disparity among states.
  • Also, the impact of GST on the tax net is to be seen in the long run.
  • With the spread of digitisation and technology, efforts to ensure lower tax collection cost is of importance.
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