Latest data on indirect tax collection seem to confirm the fear of an economic slowdown and raise serious doubts about the feasibility of the Centre?s deficit reduction targets for 2011-12. A steep decline in customs revenue brought down the growth in overall indirect tax revenue for August to 9.6%, against the Budget estimate of over 17% growth for the whole fiscal.
While customs revenue declined by 6.7% in August, excise rose by 11.7%. The growth targets for the whole fiscal was 15% and 19%, respectively.
The saving grace was a 40% increase in service tax collection in the month. This bears out the healthy increase in services component of the GDP reported for the first quarter of the fiscal is yet to taper off.
A month-by month analysis of the collection shows that customs and excise both have maintained a declining trend since June. Excise and customs collections are reflective of the health of the Indian industry as they indicate the extent of industrial activity.
In August, customs collections stood at R10,120 crore, the lowest in the current financial year. Similarly, excise duty collections during the month were at R11,777 crore ? the lowest in the last three months.
The moderation in revenue growth could be partly attributed to reduction in excise and customs duties on crude and petroleum products, but a decline in industrial activity is also to be blamed for in the case of excise at least.
In June this year, the government removed the 5% customs duty on petroleum crude, reduced the import duty on petrol and diesel by 5% and also abolished the R2.6 per litre basic excise duty levied on diesel, which cost the exchequer R49,000 crore.
During April-August period this year, the overall indirect tax collection stood at R1.37 lakh crore, an increase of 23.5%, over the corresponding period last year. The mop-up from customs rose to R60,882 crore during the period from R49,683 crore during April-August last year, while excise rose to R47,805 crore from R40,270 crore. The service tax collection grew by 35% to R29,066 crore in the first five months of the current fiscal. The government has estimated to raise R3.92 lakh crore in the current financial year.
What could upset the government?s revenue calculations is also the fact that the growth in net direct tax collection is still in the negative territory due to high refunds. During April-August this year, the direct tax mop-up stood at R96,738 crore, which is 3.3% less than the corresponding period last year. On account of huge refunds of R57,622 crore, the growth in net corporate tax declined by 12%. The corporate tax collection were at R50,730 crore during the period. The net income tax mop-up stood at R45,848 crore, which is 8% more than last year. According to a finance ministry official, the growth in net direct collection would turn positive only after advance tax numbers, which is due by September 15. ?The net mop-up is negative due to high refunds of R60,000 crore till date. However, the gross collection is impressive,? the official said.
The gross direct tax mop-up during April-August this year rose by around 26% to R1.54 lakh crore. The growth in the gross collection is mainly on account of corporate tax , which grew by nearly 30% to R96,597 crore. On the other hand, the income tax mop-up rose by 20% during April-August this year to R57,582 crore.