The economic upswing is translating into higher revenues for the government, with indirect tax mop-up in the first two months of this financial year up over 49% to Rs 43,669 crore as compared to the corresponding period last fiscal. Indirect tax collections during April and May last year were only Rs 29,295 crore.

Customs collection during April and May was up almost 66% to Rs 19,379 crore as compared to the corresponding previous period, while excise mop-up was 54% higher at Rs 16,054 crore, official sources told FE. Service tax collections during the period were marginally up by 4.6% to Rs 6,236 crore, sources added.

This year’s visible improvement in customs, excise and service tax collections can be attributed to both higher taxes and the recovery in the economy. The finance minister increased median excise duty from 8% to 10% in the last Budget, in line with the decision to phase out fiscal stimuli.

Last fiscal, government had to face revenue losses around Rs 40,000 crore by way of reduction in indirect tax rates which were offered to boost industry. This was in addition to losses to exchequer due to slackening industrial activity.

Central Board of Excise and Customs (CBEC) chairman V Sridhar also recently attributed the improvement in tax collections to recovery in sectors such as petroleum, textiles and chemicals. At the recent chief commissioner?s conference, Sridhar said that the 2% hike in the median rate of central excise in this year?s Budget has also helped.

Higher excise collections and customs mop-up are both well-indicated by April industrial output which grew at a record 17.6%, posting double-digit growth for the seventh consecutive time. It was possible on account of a strong showing by the manufacturing sector, led by the capital goods sector and the consumer durables segment. For the current fiscal, the government has estimated that Rs 3.15 lakh crore would be collected through indirect taxes.

Out of this, Rs 1.32 lakh crore is estimated to come from excise, Rs 1.15 lakh crore from customs and Rs 68,000 crore from service tax. In 2010-11, the government proposes to mop up about Rs 4.30 lakh crore through direct taxes, which has grown at a much faster pace than indirect taxes in recent years.