The corporate tax arrears has touched a massive Rs 20.78 lakh crore since the year 2014. Of the total pending dues, the government has managed to recover only 15%, which amounts to a mere Rs 3.19 lakh crore from the corporate tax defaulters. The Ministry of Corporate Affairs informed the Parliament on this in July 2019.
The Ministry of Corporate Affairs, replying to query asked in the Lok Sabha, said that a considerable amount of pending dues are not collectable instantly due to several reasons such as companies undergoing liquidation before National Company Law Tribunal (NLCT) for bankruptcy and insolvency.
Apart from that, some companies do not have sufficient assets to put on sale and recover taxes. Furthermore, a stay on the tax recovery from the income tax department officials, the courts and assets of defaulting companies are jointly attached with a few government companies are affecting the recovery of tax arrears.
The data presented by the Ministry of Corporate Affairs says that the government could recover about 16% to 17.3% of the pending corporate tax dues annually over the last three financial years. The collection in the FY16 was poor as the Ministry recovered only 4.4% of the corporate tax arrears.
The revenues generated for the government in the form of corporate tax collection was averaging around 1.9% of the total gross domestic product (GDP) between the years 1999 and 2004.
The average revenues through corporate tax increased to average around 3% of the GDP between the years 2005 and 2007 while its peak was recorded in FY07 when it hit a whopping 4% of the GDP. It was 3.5% of the GDP in 2018-19 and it has made a downward movement since then.
The government recently reduced the corporate tax rate for the existing companies by 10% points and 12 basis points for the new ones. This was done in order to boost the ailing economy. To facilitate the companies pay their corporate tax dues, the government has offered concessions but the collection has not been as expected.
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