Direct tax refunds down 67% till May 21

Deflating the government’s claim of expediting them amid the Covid-19 pandemic, direct tax refunds have declined 67 per cent since April 1 over the same period last year.

Refunds, or the cash outflow from the government, stood at ~16,242 crore during April 1-May 21 of this fiscal year, against ~48,900 crore a year ago.

The Central Board of Direct Taxes in a statement on Friday said tax refunds worth ~26,242 crore, to

1.7 million assesses, had been released. But, according to two government officials in the know, the sum includes adjustments made by the department for outstanding demand for other years.

Close to ~10,000 crore appears to have been adjusted against such demands even as the related disputes are pending before appellate authorities, and do not result in any immediate cash release.

Cases that have been adjusted for existing demand are most likely to be disputed again if the pleas of taxpayers are upheld, an official pointed out.

Expediting refunds of up to ~5 lakh was announced as part of the government’s policy initiative to fight the economic impact of Covid.

As of May 21, refunds of at least ~52,491 crore, in about 40,000 cases, are those pertaining to cases either picked up for scrutiny or pending at the end of assessing officers and awaiting approval.

Of those, about ~36,155 crore of refunds is stuck because these cases have been picked up for scrutiny.

The moment a case is picked up for scrutiny, the refund is blocked. About ~16,336 crore of refunds, involving 20,500 cases, is pending at the assessing officers’ end.

“There has been no administrative instruction to clear refunds for cases

picked up for scrutiny or the ones pending at the assessing officers’ end. That is making up for the bulk of the refunds,” said a government official.

Low refund means net direct tax collection may rise even as gross collection stays weak. Refunds of ~6,772 crore were disbursed in April. That is only a third of the ~18,474 crore released in the corresponding period of 2019-20. Due to that, direct tax collection, net of refunds, grew by 36.5 per cent, even as gross collection contracted by 5.4 per cent in April. Amit Maheshwari, tax partner, AKM Global, said broad-basing taxpayers in terms of releasing refunds would provide a much-needed liquidity boost to taxpayers. “The government should quickly release refunds even in cases where scrutiny assessments are going on,” he said.