After high compliance during DeMo, GST rollout, tax e-filings drop in FY19

Income tax filings, which appeared unstoppable until recently, seem to be having a change of heart.
After high compliance during DeMo, GST rollout, tax e-filings drop in FY19

HYDERABAD: Income tax filings, which appeared unstoppable until recently, seem to be having a change of heart. Latest data shows that tax e-filings declined in FY19 to 66.8 million from 67.5 million in FY18. This is the first time in recent years that income tax filings saw a de-growth, and if the trend persists, it will affect the country’s fiscal math, which already is seeing signs of trouble from several quarters.

FY19’s decline comes amid high growth seen post-demonetisation and GST rollout, when the tax filings grew at an enviable 43 per cent in FY16, and 22 and 28 per cent in FY17 and FY18, respectively. Similarly, growth in registered filers too is contracting. While they grew 21 per cent in FY16, registered filers’ growth dropped with a giant thud to 15 per cent in FY19.

“It begs the question whether compliance was weaker in the latter part of FY19 given that the number of registered filers continued to see steady growth. If compliance has been weak, the new government will aim at increasing the filings and collections in FY20,” noted Suvodeep Rakshit, analyst, Kotak Economic Research. The good news is that the contribution of high-income tax filers is steadily rising.

For instance, the share of filers with annual taxable income of less than `5 lakh fell to 76.2 per cent in FY19 from 86.2 per cent in FY12, while those in the income bracket of `5-10 lakh account for 16.4 per cent, up from 8.5 per cent. Muted income tax filings growth comes when indirect tax revenue is weak, with revenue buoyancy falling behind budget estimates. Declining tax revenue is what the government would like to avoid at all costs to not upset the economic applecart.

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