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Coercive actions, economic revival team up to lift tax mop-up

Prime News, National (New Delhi), April 10:- In a paradox of sorts, tax collections have significantly improved in the past few months despite the ongoing Covid-19 pandemic and its impact on the economy.

Experts said the reasons for the surging tax collections have been a combination of improving economic activities and coercive actions by the authorities.

In an ideal situation, tax collection should be in tandem with the GDP growth rate, but currently, tax mop-up has been growing at a much faster pace, said Rajat Mohan, senior partner at AMRG & Associates.

Direct tax collection for the financial year 2020-21 stood at Rs 9.45 lakh crore, as per the provisional data. The net collection was around 5 per cent higher than the revised estimates for 2020-21.

“The net direct tax collections represent 104.46 per cent of the revised estimates of Rs 9.05 lakh crore of direct taxes for FY 2020-21,” said a Finance Ministry statement.

Ved Jain, former President of the Institute of Chartered Accountants of India (ICAI), told IANS that a major reason for direct tax collections having surpassed the revised estimate for FY21 was because the estimate was “conservative”.

“Budget estimates for FY21 were quite high, as the pandemic was not anticipated. In April, May and June, there was no collection… September onwards the economy started picking up and when the revised estimates were prepared, the government was not so hopeful that the economy will revive to this extent. Now that the economy has done well in the months of January, February and March, the collection has surpassed the estimates, which were too conservative,” he said.

Jain also said that the direct tax amnesty scheme of ‘Vivad Se Vishwas’ has helped the government increase its tax collection.

“The Vivaad Se Vishwas scheme also must have helped the government get direct tax revenue. The government says it has been able to collect around Rs 50,000 crore on the basis of the scheme,” he said.

According to Aditi Nayar, Chief Economist, ICRA: “As expected, the government of India’s direct tax collections have modestly overshot the revised estimates for FY2021. The collections appear to have contracted by a modest 3.5 per cent in March 2021, suggesting the back-ended release of refunds.” (MR, Inputs: Agencies).

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