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24% fall in indirect tax revenues worries Govt
November, 05th 2009

With revenues from indirect taxes recording a 24 per cent decline in the first-half of the current fiscal, the Centre is now betting on economic growth in the second-half and the proposed Goods and Services Tax (GST) regime in 2010-11 to bring about a sustained rise in such revenues.

The fall in indirect tax revenues is a major area of concern. The fiscal correction, which we have to make, will require some time, the Finance Minister, Mr Pranab Mukherjee said.

Indirect tax revenues have taken a big hit this fiscal due to lower imports and sharp fall in excise duty revenues. The decline in indirect taxes, on both Customs and excise duty front, has become a source of concern for policymakers in the Finance Ministry. In the first half of the current fiscal, Customs duty revenues declined to Rs 37,744 crore (Rs 56,241 crore).

On the other hand, excise duty revenues declined to Rs 36,893 crore (Rs 47,870 crore). Service tax collections during April-September 2009 stood at Rs 23,236 crore (Rs 24, 139 crore).

The Customs duty revenues have fallen on the back of sharp decline in merchandise imports. Indias cumulative imports recorded a negative growth of 33 per cent in April-September at $ 124.6 billion ($ 185 billion).

Oil imports during the first half was 45 per cent lower at $ 34.8 billion ($ 63.3 billion). The imports during September 2009 stood at $ 21.37 billion, which was about 31 per cent lower than the $ 31.1 billion of imports recorded in the same month last year.

Non-Plan spend under watch

The decline in indirect tax revenues has compelled the Government to rein in expenditure on the non-Plan side. We are looking quite closely at steps to help curtail non-Plan expenditure, especially subsidies on fertilisers and petroleum products, Mr Mukherjee said.

Stating that the scarcity of public resources underlines the importance of making effective use of resources, Mr Mukherjee said that special attention was being paid to expenditure management with an emphasis on not just quantum but quality of spending.

On October 28, the Union Finance Secretary, Mr Ashok Chawla, advised State Finance Secretaries to cut down non-Plan expenditure while ensuring full and proper utilisation of the Plan expenditure.

The Financial Advisors of Central Ministries have also been asked to cut down non-Plan expenditure as far as possible while ensuring proper utilisation of Plan expenditure.

GST introduction

On the proposed Goods and Services Tax, the Government is trying to stick to the schedule of its introduction from April 1, the Finance Minister said.

We are working on it. There has to be convergence. We would like to give a foolproof GST system instead of a half-baked one, he said.

There are doubts on the Centre and the States meeting the earlier announced target date of April 1, 2010 for the GST introduction. Besides bringing a sustained rise in indirect tax revenues, the introduction of GST is also expected to help achieve the targets on fiscal consolidation indicated in the medium term fiscal policy statement, Mr Mukherjee noted.

The Finance Minister had recently stated that he would not be surprised if there were some slippage in the introduction date of the new tax system.

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