The major contributor to the drag was Vadodara which saw a fall of 80% in tax collection. Experts say that the tumble is due to the high number of salaried people in Vadodara, reduced rate of tax deducted at source (TDS), job cuts and salary cuts.
According to sources, Gujarat’s collection target was Rs 65,000 crore in the beginning of FY 2020-21 but was revised to Rs 43,000 crore looking at the actual collection figures. Sources in the central agency said the finance ministry had asked officials to remain liberal in dealing with the assessee.
“We have been told not to ask anybody to pay appropriate tax, even if we are aware about some evaders. We have powers to open the account next year and the evaders will be made to pay,” a senior IT officer told TOI, requesting anonymity.
Total lockdown in Q1 led to fall in tax collection
According to tax and industry experts, the key reasons for the fall in collection is the total lockdown in the first quarter when the income tax department only received TDS, that too from salaries paid by the employer and interest paid by the banks. The job loss, the pay cuts and reduction of overall GDP is reflected in the income tax figures.
The TDS collection, however, grew 28% compared to last year. The last instalment of advance tax was to be paid by March15, 2021.
Parth Ganatra, vice-president, Rajkot Chamber of Commerce and Industry (RCCI) said, “Industry revenue was drastically low in the first quarter of the fiscal and there were only expenses, which is reflected in the overall tax collection target.”
Jainik Vakil, a chartered accountant added, “This tax collection figures show that even during pandemic Gujarat’s industries did well. The figure shows that by March 31, the collection would be the same as last year, which indicates that despite the GDP dropping, the income tax in Gujarat is the same as it was last year.”
Every October, the income tax department starts planning and conducting surveys and approaches big taxpayers to see that they pay third and fourth instalments of advance tax as per the ‘expectations’ of the department. However this financial year, this exercise was not done and officials did not ‘pressurise’ assessees, top department officials said.