Anticipating that economic slowdown could hurt revenue collection, the finance ministry has decided not to give more tax rebate to the industry or withdraw taxes imposed on certain sectors in Budget 2011-12.
Sectors that have been complaining about imports ? automobiles, branded garments and shipping ? will have to put up with the changed regime. ?The Budget process is over. Whatever is the demand (from industry), we would see in the next year,? a finance ministry official told FE. The official further said the measures taken in the Budget, especially the new import duties, were not only aimed at raising revenue, but also to give level playing field to certain industry segments.
Heavy industries and public enterprises minister Praful Patel had asked the finance ministry to give two years time for the auto industry to comply with the new import duty norms for completely knocked down (CKD) units.
In Budget 2011-12, finance minister Pranab Mukherjee had redefined the meaning of CKD units to encourage local production of automobiles. Subsequently, pre-assembled engines, gearboxes and transmission systems were brought out of the ambit of CKD and now attract 30% import duty as against the earlier duty of 10%.
Similarly, the textiles ministry had sought rollback of 10% excise duty on branded apparel, following protests from retailers who claimed that it would hurt their business prospects. However, later the finance ministry increased the abatement from 40% to 55% of the retail sale price. This, however, failed to satisfy the branded readymade garment makers and they were asking for a complete rollback.
Meanwhile, Indian shipping companies are being forced to hire foreign vessels for transporting domestic cargo as they have to pay 4% additional customs duty and 1% countervailing duty, even if these vessels are registered in India.
?We can?t give any more concessions. We are under pressure to achieve the tax collection target due to the expected moderation in industrial growth,? another official said. Notwithstanding the robust indirect tax collection in the first two months of the current fiscal, the finance ministry is anticipating that some moderation is likely to happen in tax collection in the coming months due to the expected slowdown in industrial growth.
The excise duty collections have registered a 38.4% jump to R11,586 crore in April-May, compared to the year-ago period, while customs revenue rose 37% to R25,176 crore and service tax collection was 27.6% higher at R7,722 crore.
However, growth in industrial output plunged to 6.3% in April against 13.1% in the corresponding period last year due to a dismal show by the manufacturing and mining sectors. The government has an indirect tax collection target of R3.92 lakh crore this year, which is around 15% more than what was planned in the previous fiscal.