Tax arrears from corporate houses have ballooned to over Rs 20.78 lakh crore in the last five years. Of this, the government has been able to recover arrears of just Rs 3.19 lakh crore from defaulters, or a little over 15 per cent of the pending amount, the Parliament was informed in July.
Replying to a written question in the Lok Sabha, the Ministry of Corporate Affairs (MCA) said that "a substantial part of the outstanding taxes is not readily collectible due to various reasons, including companies in liquidation, before NCLT under the Insolvency and Bankruptcy Code, and companies not having adequate assets for sale and recovery", The Hindu Business Line reported.
According to the ministry, factors such as a stay on the tax demand by Income Tax Authorities, the Income Tax Appellate Tribunal (ITAT) or the courts and assets of a defaulting company being jointly attached with other government agencies also contributed to the under-recovery of corporate tax.
As per data presented by the MCA, the government was only able to collect 16-17.3 per cent of the corporate tax arrears annually in the last three fiscals, and a dismal 4.4 per cent in FY16.
The tax revenue from corporates, which averaged around 1.9 per cent of GDP between 1999-2000 and 2003-04 increased approximately to an average of 3 per cent till FY07 and inched to its highest, that is, 4 per cent of GDP, in 2007-08. It has been sliding ever since having a share of 3.5 per cent in GDP at current prices in 2018-19.
Recognising that corporate tax rates in India are among the highest in the world, the Modi government recently handed out a fiscal stimulus of Rs 1.45 lakh crore in the form of tax exemptions to India Inc. The corporate tax rates for domestic companies that do not avail of any tax incentive were slashed to 22 per cent from the previous 30 per cent. Effective corporate tax rate after surcharge now amounts to 25.17 per cent. For new manufacturing companies, the existing tax rate of 25 per cent was brought down to 15 per cent.