The country?s indirect tax collections have taken a severe hit in the first quarter of the current fiscal. As per estimates by the finance ministry, the total indirect tax collections in April-June 2009 quarter fell by 29.3% to Rs 44,692 crore from Rs 63,252 crore in the same quarter previous fiscal, according to official sources.

The rapid contraction in indirect taxes is predictably due to the economic slowdown that prompted the government to announce a series of tax cuts and other fiscal stimulus measures. Custom duty collections recorded the steepest fall of 37.2% to Rs 17,858 crore in April-June 2009, as compared to Rs 28,459 crore in April-June 2008.

Excise duty mop up also fell by 30.8% to Rs 17,291 crore April-June 2009 from Rs 24,978 crore April-June 2008. The decline in service taxes was a relatively modest 2.8% to Rs 9,543 crore in April-June 2009, as compared to Rs 9,815 crore in April-June 2008. Direct taxes collections, however, grew by 3.65% in April-June 2009 to Rs.59,465 crore, up from Rs.57,373 crore in the same quarter last fiscal, the ministry said last week.

Responding to the global crisis in the last fiscal, the government pared excise duty rates by 6% to 8% and service tax by 2% to 10% to stimulate demand. The fiscal stimulus effected in 2008-09 amounted to 3.5% of GDP, or Rs 1,86,000 crore, finance minister Pranab Mukherjee said in Parliament on July 6. As a result, the fiscal deficit, which is the excess of total expenditure over revenue, widened to 6.2% of the GDP in 2008-09. In the current fiscal, it is estimated at 6.8% of the gross domestic product.

A government official told FE that fall in the tax collections is not unexpected. He also ruled out any immediate rollback of cuts. ?These cuts are part of the fiscal stimulus package that has to be maintained at the current level this year too. This is important to stimulate growth,? he said.

The Union Budget 2009-10 has pegged indirect tax collections at Rs 2.69 lakh crore, lower by 4.2% when compared to the revised estimate of Rs 2.81 lakh crore worth of taxes collected last year. Due to the persisting downturn, the gross tax receipts have been estimated at Rs 6,41,079 crore in 2009-10, lower by 6.7% of Rs.6,87,715 crore in 2008-09.

A direct tax cannot be shifted to others, for example, the personal income tax. An indirect tax is passed on to consumers by adding it to the price of the product such as the sales tax.