Even as the COVID-19 pandemic and the lockdown to combat it has brought the economy to a near standstill, the Centre has gone ahead and set its Income Tax authorities a daunting target of collecting ₹13.2 lakh crore for the fiscal year ending in March 2021.
In a correspondence to all Principal Chief Commissioners of Income Tax (PCCIT) dated April 16, the Central Board of Direct Taxes (CBDT) has spelt out zone wise targets for the collection of corporate tax, personal income tax and security transaction tax (STT).
The figures, which are a reiteration of the revenue receipt estimates spelt out by Finance Minister Nirmala Sitharaman in the Union Budget presented in February, comrprise a corporation tax component of ₹6.81 lakh crore, personal income tax of ₹6.25 lakh crore and STT at ₹13,000 crore.
“The budget target of each cadre controlling PCCIT has been fixed keeping in view the revenue potential of each region, which is based on the weighted average growth rate of net collections of last three years, giving highest weight to the immediately preceding year,” the CBDT said in its letter. After the budget, Revenue Secretary Ajay Bhushan Pandey had said that a budgeted 12% growth in tax collections may look ambitious to some but was achievable in an economy projected to clock a 10% nominal GDP growth.
However, the pandemic has emerged as the single biggest challenge to the economy and the IMF earlier this month cut its projection for India’s annual GDP growth in the current fiscal year to 1.9%, from an earlier forecast for a 5.8% expansion.
A senior income tax officer confirmed having received the CBDT letter with details of zone wise targets but declined to comment on whether the target was achievable. “You see the current environment and judge for yourself,” quipped the official, who spoke on the condition of anonymity.
Several tax consultants told The Hindu that the Revenue Department and the CBDT would have little choice than to revise downward the zone wise targets handed out to the tax bureaucracy.
“No way it can be achieved in such a challenging environment with a variety of factors like the massive hit to the economy and massive lay-offs of employees in the corporate sector,” a top tax expert from Ahmedabad said, declining to be identified.
Another expert from Mumbai said that the personal income tax collection would be affected hugely because most of the companies had cut salaries of employees or sent the employees on furlough (leave without pay). “All airlines, hospitality companies and several others have cut salaries and sent the employees on rotation basis on furlough, so that will hit the tax collections very badly,” he added.
An entrepreneur running a mid-size manufacturing unit in Ahmedabad even expressed apprehensions of “tax terrorism” if the Ministry of Finance did not revise the targets given to the field offices of the tax department. “I sincerely hope the government will have a second look at the figures, otherwise field officials will go aggressive targeting businessmen and corporates,” he added.