Net direct tax collection slumps amid record refunds

Net direct tax collection fell sharply by 47.9 per cent in the first two months of the current fiscal (April and May), thanks to unusually high refund payouts during the period.

Refunds more than doubled compared to the same period last year, amounting to more than Rs 37,000 crore.

Though the total tax collection stood at Rs50,405 crore in April-May 2011, the net collection plunged to Rs12,954 crore due to clearance of at least 40 lakh refunds amounting to Rs37,451 crore. The collection during the same period in the previous year was Rs24,878 crore.

"The decline in net direct tax collection was on account of an increase of 217 per cent in tax refunds," a press note from the Central Board of Direct Taxes (CBDT) said.

Refunds at the start of the year were perhaps the highest in history. As against Rs37,451 crore this year, the figure for the year-ago period was Rs11,824 crore. While CBDT has cleared 40 lakh refunds in just the first two months, the agency had issued 85 lakh refunds in the entire 2010-11 financial year.

There are concerns in the government that the sharp increase in refunds amid a possible economic slowdown might lead to a shortfall in projected tax collections.