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Indirect tax receipts post negative growth in festive season
October, 17th 2008

In what seems to be an indication of the slackening of economic activities, indirect tax collections (excluding service tax) grew by a mere 9.8% to Rs 1,13,279 crore in the first half of the fiscal. In fact the pace of growth was even lower in the month of September, at 6.9% and the government mopped up Rs 19,421 crore.

Excise duty collections dipped to a negative of 3.8% to Rs 9,800 crore in September this year, down from Rs 10,186 crore in September last year, according to official figures released on Thursday.

Although collections from the tax on manufacturing have been lower than the budgeted 9.3%, this is the first time that it has posted a negative growth. Incidentally even when industrial growth was down at 1.3% in August, excise collection continued to register a positive growth of 1.2%.

Excise duty collections up till September grew by a mere 2.3% to Rs 55,923 crore, signalling that reaching the budget estimate of Rs 1,36,610 crore from the tax in 2008-09 will be an uphill task.

While experts say there is not a direct correlation between excise duty collections and industrial production, it does point towards a slowdown. Economist Bibek Debroy said, The figures are not completely unexpected given that the slowdown in economic activities pre-dated the Wall Street crisis.

The Prime Ministers Economic Advisory Council expects GDP growth to moderate to 7.7% in 2008-09 from 9% last fiscal due to a slowdown in agriculture and industry as well as external factors.

The tax department had been hopeful that collections would improve in the festival season beginning September, but the low collections indicate that this is not the case.

Meanwhile custom duty collections in the first half of this fiscal registered a healthy growth of 18.3% to Rs 57,356 crore, as compared to Rs 48,480 crore in the same period last fiscal. In the month of September, collections from the duty one exports and imports was even higher at Rs 9,621 crore, up 20.6% from the Rs 7,975 crore netted in September 2007. Officials said the spurt is largely due to the weakening rupee which has made imports more expensive.

Surprisingly, service tax collections in the month of August grew by a mere 13.1% to Rs 3,702 crore, partially higher than the Rs 3,273 crore collected in the same month last fiscal. The total service tax collection for the April-August period too
has lowered and posted a growth of 25.9% to Rs 23,051 crore as compared to Rs 18,316 to the corresponding period in the last fiscal

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