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Sep 18, 2020
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Direct taxes: Receipts fell in FY20, but refunds rose
As a fraction of direct taxes collected, refunds of such taxes peaked at 16% in FY17, the demonetisation year, but have since fallen and touched 12.4% in FY19, according to data reviewed by FE. However, the rate, given the available data, seemed looking up again in FY20. The refunds in April-January last fiscal were Rs 1.71 lakh crore or close to 14% of the collections in the whole of FY20 and may have risen further in February-March. FY20, it may be noted, saw the uncommon phenomenon of year-on-year decline in tax receipts, owing to a deep cut in corporate tax rate and a steep decline in economic growth.
The Parliamentary Standing Committee on Finance had raised an alarm over ‘excess’ advance tax payments in the last two financial years, drawing inference from the ‘high’ component of interest payouts in the funds refunded. The panel attributed the perceived trend to the taxman, in his drive to meet the revenue targets, apparently pushing the taxpayers to pay excess taxes. While this is certainly not true of FY19, refunds as a share of collections have of course risen in FY20, but perhaps not at a rate necessitating an alarm.
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