Direct tax collection falls in six states; UP and Rajasthan worst performers
Mop-up in Uttar Pradesh fell by almost 20% to ~235 billion in 2017-18, from ~293 billion in 2016-17
Direct tax collections declined in six states in 2017-18, the latest data released by the income tax department shows. Among the larger states, the sharpest decline was seen in Uttar Pradesh, followed by Rajasthan and Bihar.
Mizoram, Nagaland, and Sikkim are the other states from where collections have fallen. Collections have also fallen from the Union Territory of Daman and Diu.
At the aggregate level, total direct tax collections rose by 18 per cent in 2017-18, rising to ~10 trillion, up from ~8.49 trillion in 2016-17.
However, collections from Uttar Pradesh fell by almost 20 per cent to ~235 billion in 2017-18, from ~293 billion in 2016-17. Similarly, in Rajasthan, collections fell by 4.8 per cent to ~192 billion in 2017-18 from ~201.8 billion the year before, while the mop up from Bihar declined by 3.6 per cent to ~62.8 billion, from ~65 billion the year before.
It’s difficult to know for sure the precise explanation for the fall in tax collections in these states. Slower economic growth is unlikely to be the reason as these states have seen healthy growth.
For instance, Uttar Pradesh’s economy grew at 10 per cent in 2017- 18 (current prices), marginally higher than 9.9 per cent in 2016-17. However, Rajasthan grew at 10.7 per cent in 2017-18, marginally lower than 11 per cent in 2016-17, while Bihar grew at 14.5 per cent, down from 15.3 per cent over the same period.
A possible explanation for the decline in collections from these states in 2017-18 could be traced to the sharp surge in tax collections in the previous year – 2016-17 — analysts Business Standard spoke to said.
For instance, tax collections from UP increased by 17.3 per cent in 201617, the period of demonetisation, after contracting by 8 per cent in 2015-16. Similarly, collections from Rajasthan grew by a staggering 51.1 per cent in 2016-17, after growing by a mere 1.5 per cent the previous year. By comparison, at the aggregate level, tax collections grew by 14.6 per cent in 2016-17.
In the northeastern states, the differential is of a much higher magnitude. In Mizoram and Nagaland, tax collections grew by a staggering 117.5 per cent and 298 per cent respectively in 2016-17, after growing at 29 per cent and 32.6 per cent in the previous year, respectively.
The sharp surge observed in tax collections from these states could have been on account of demonetisation. This is unlikely to have sustained in the subsequent years said an economist who Business Standard spoke to.
However, this sharp uptick in collections in 2016-17 is not observed in Maharashtra, Delhi and Karnataka, which account for bulk of direct tax collections. For instance, growth in tax collections from Delhi actually fell to 7.1 per cent in 2016-17, from 11.4 per cent in 2015-16. In Karnataka, it grew marginally from 18.9 per cent to 19.3 per cent, while in Maharashtra, it rose from 3.3 per cent to 9.4 per cent during the same period.