Lower refunds boost April tax collection by 36.5%

Lower refunds boost April tax collection by 36.5%

Direct tax collection surged 36.5 per cent to Rs 34,784 crore in the first month of fiscal year 2020-21, despite a nationwide lockdown, thanks to a 63 per cent year-on-year (YoY) fall in tax refunds in April.

Without accounting for refunds, the collection contracted 5.4 per cent, indicating muted economic activity as the Covid-19 pandemic and subsequent curbs paralysed most sectors.

Refunds of Rs 6,772 crore were about a third of the amount disbursed in the same month last year, at Rs 18,474 crore, which boosted net collection.

Incidentally, the government last month announced expediting refunds up to Rs 5 lakh to improve cash flows for individuals and small and medium enterprises amid coronavirus-related disruptions in the economy.

“A sharp fall in refund disbursement can be credited for the high double-digit net direct tax collection growth seen in April. The gross figure, on the other hand, paints the real picture, where collection has fallen,” said a government official.

Coming months will see net collections under pressure as the base effect will wean off, and economic growth is at a standstill.