Industrial production rose just 0.6% in the April-January period of this fiscal, against 2.7% a year earlier. Customs collections, which contracted 6.3% in December 2016, grew 10.1% in January 2017 and 10.9% in the following month, signalling a spike in gold imports. However, service tax growth has been slowing in recent months — from 12.4% in December to 9.4% in January and 7.6% in February — indicating a slowing of discretionary spending. Net of refunds, CIT collections grew just 2.6% in April-February 2016-17 from the year-ago period, against the envisaged full-year growth of 9%, indicating that the push from the last tranche of advance tax collections might not suffice to meet the target.
While the blame for sluggish CIT growth partly lies with demonetisation, the note ban has had a positive impact on personal income tax (PIT). As income taxes paid by individuals, including the securities transactions tax, grew 19.5% net of refunds in the first 11 months of this fiscal year, the total direct direct tax collections stood at Rs 6.17 lakh crore, up 10.7% from the year-ago period. Yet the direct tax revenue in April-February was just 72.9% of the full-year estimate of Rs 8.47 lakh crore, growing only modestly from 68.7% in April-January period. Clearly, neither the income disclosure scheme nor the post-demonetisation PMGKY scheme has boosted the coffers much as yet, even though increased reporting of income by large sections of traders, professionals and service providers after the note ban pushed up PIT revenue significantly.
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With the advantage of a low base tapering off, the growth in excise collection dropped to 7.4% in February 2017 from 26.3% in January and 31.6% in December 2016, thereby reducing the dichotomy between (the relatively low) industrial output growth and very robust excise mop-up that prevailed for several months. With this, the pace of growth of indirect tax collections halved to 8.4% in February 2017 from 16.9% in January 2017; during the April-February period, these taxes grew an annual 22.2% to R7.72 lakh crore, against 23.9% growth registered during April-January. Nevertheless, the government is well-poised to meet the indirect tax collection target (revised estimate) of R8.52 lakh crore for 2016-17, having achieved 91% of the target in the first 11 months, official sources said.
As for direct taxes, however, April-February data sustained the doubt that even the targeted corporate income tax (CIT) target (RE) of R4.94 lakh crore could be missed by a significant margin.
“From February 2017 onward, the favourable impact of the hikes in excise duty on fuels undertaken from November 2015 to January 2016 have dissipated. The pace of growth of excise collections is now expected to reflect a level that is closer to the rise in consumption of fuels, as well as industrial activity in the economy,” Aditi Nayar, principal economist, Icra, wrote. In fact, the recent Budget has factored in the imminent rationalisation of excise growth, with a modest 5.2% growth estimated for 2017-18, against a whopping 34% increase (RE) in 2016-17.
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