Budget 2019: Mystery of union excise duty collections being stuck at the same level for years

Union Budget 2019 India: One of the most keenly watched numbers in finance minister Nirmala Sitharaman’s budget will be her projection of tax collection for the current financial year. In the interim budget presented before Lok Sabha election, then finance minister Piyush Goyal had projected the Centre’s gross revenue collection to be Rs 25.52 lakh crore. He had projected that after deducting the states’ share in the central taxes, the net taxes collected by the Centre will be over Rs 17 lakh crore, a projected increase of almost 15 percent. However, the Union government’s excise duty collection is stuck at the same level for the last two years and change is expected in this year as well.

A combined goods and service tax jointly levied by the Centre and states since July 2017 has subsumed union excise duties levied by the Centre on the production of goods. But petroleum products are still outside the purview of GST. Union government collects excise duty on production of petroleum products like petrol, diesel, domestic gas and other industrial products while sales tax or VAT on the sale of petroleum products is being collected by states.

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According to the information given in the interim budget, the central government’s excise duty collection (actual) was Rs 2,59,431 crore in FY 2017-18. Former finance minister Arun Jaitley had projected last year that the union government would collect Rs 2,59,600 crore in FY 2018-19 and according to the revised estimates given in the interim budget, union excise duty collection was bang on the Jaitley’s projection of Rs 2,59,600 crore. It was just Rs 12 crore more than Jaitley’s projection.

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What is more surprising that in the interim budget presented in February this year, then finance minister Piyush Goyal had retained the union excise duty collection for FY 2019-20 at the same level of Rs 2,59,600 crore which is unusual.

This is the third consecutive year when the excise duty collection of the Union government has been pegged at Rs 2.59 lakh crore.

During the same period, the Union government’s net tax collection is projected to go up from Rs 12.42 lakh crore to 17.05 lakh crore, a jump of over 37%. And the gross tax collection is projected to go up from Rs 19.19 lakh crore to Rs 25.52 lakh crore, a jump of 33%.

Union excise duty collection being stuck at Rs 2.59 lakh crore for three years is also surprising as consumption of petroleum products in the country has registered average annual compound growth of over 5% for the last several years.

If there is no change in the excise duty rates then ideally the excise duty collections should have reflected the average growth rate in the production and consumption of petroleum products in the country. But excise duty collections are projected to remain stuck at the level of Rs 2.59 lakh crore since 2017-18.