Indirect tax collections grew 36.5% in the first five months of the year and by 12.2% even after stripping of additional levies imposed since last Budget...
Indirect tax collections grew 36.5% in the first five months of the year and by 12.2% even after stripping of additional levies imposed since last Budget, indicating a healthy nominal GDP growth momentum, chief economic adviser Arvind Subramanian said on Wednesday.”When tax collections are growing at double digits, it suggests that the underlying tax base or the nominal GDP seems to be healthy and moving upwards,” Subramanian said.
The growth in indirect tax collections was almost double the projected rate of growth of 18.8% for FY16, giving some some comfort to the government on the fiscal front as there are uncertainties on meeting the disinvestment revenue target and expenditure stood at 34% of the budget estimate for the full year in April-July period. Besides higher indirect tax revenue, the government could use savings in fuel subsidies to step up public investment to boost economic activity.
The indirect tax collections stood at Rs 2.63 lakh crore in April-August, with 69.7% growth in excise duty collections, 21.6% in service tax and 21.1% in customs duties. Without additional tax measures, customs duties grew by 15.4%, excise duties by 9% and service tax by 11.9%.
India’s economy grew at a slower-than-expected rate of 7% in Q1FY16, which Subramanian had said could be an underestimate. He expected the economy to grow by about 8% in FY16.
The additional measures taken in this year’s budget including hike in median excise duty from 12.36% to 12.5%, increase in excise duty on diesel and petrol, withdrawal of excise benefits for auto sector and increase in service tax rate from 12.36% to 14% from June helped the collections. The customs duty collections were helped by rupee depreciation.