Direct Tax Mop Up Likely To Surpass Indirect Taxes This Fiscal

For the first time ever, the Centre''s direct tax collections is likely to surpass the indirect tax collections this fiscal, if the current trend in tax revenue mobilisation is any indication. In April-August this fiscal, the Centre''s net direct tax collections grew 42 per cent to Rs 61,030 crore as compared to Rs 42,980 crore in the same period last year.

Even if the net direct tax collections in April-August 2007 is lower than the indirect taxes collections in April-July 2007 of about Rs 80,000 crore (the latest official data available till now), sources pointed out that the growth in direct tax collections has been above 40 per cent in each of the months so far this fiscal. There are strong indications to show that this trend is likely to be maintained during the rest of the current fiscal. For 2007-08, the Centre has budgeted direct tax collections at Rs 2,67,490 crore, which is only about 27 per cent over the budget estimate of Rs 2,10,684 crore. According to the revised estimates, the Centre''s direct tax collections in 2006-07 stood at Rs 2,29,272 crore, which represents a 38 per cent increase over collections of Rs 1,65,202 crore in 2005-06.

Analysts point out that even if a conservative 30 per cent growth materialises this fiscal, the Centre''s direct tax collections would comfortably surpass the budget estimates of indirect taxes, which has been pegged at Rs 2,79,190 crore for 2007-08. In all through the post-reforms era, the tax policy focus has in a way shifted from indirect taxes to direct taxes, with the taxation of earnings of individuals and corporates gaining more importance than production and trade. In fact, 2006-07 was the first year when corporation tax emerged as the biggest taxation source for the Centre, comfortably exceeding the excise collections for that year. In 1990-91, less than a fifth of the Centre''s gross tax revenues came from direct taxes. Now direct taxes account for almost 50 per cent of the Centre''s gross tax revenues.