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Indirect tax collection on target despite ups & downs in growth
January, 11th 2012

The government seems on course to achieve, or even exceed marginally, its indirect taxes collections target for the current financial year despite the economic slowdown. With a quarter to go, indirect tax collections have touched 72% of the budgeted Rs 3.97 lakh crore for the current fiscal, data released by the government on Tuesday showed.

"We are confident of achieving the budget estimates," S K Goel, chairman, Central Board of Excise and Customs told reporters. The government is struggling to contain the fiscal breach to the minimum after its tax assumptions went awry because of the economic stress. However, most of the damage has been in the direct tax collections, which have, after refunds, grown just over 7% in the first eight months of the fiscal.

Indirect tax collections grew at 16% during December 2011 over the previous year. Indirect tax collections have been surprisingly robust despite industrial production growth slumping into negative in October and government cutting import duty on crude and petroleum products to cushion the impact of rising crude prices.

Excise duty, a tax levied at the factory gate and a leading indicator of production of goods, bounced back strongly in December indicating a revival in manufacturing growth after a 5.1% contraction in October.

The economy is expected to slow to about 7% this fiscal, against 8.5% in the previous year, Prime minister Manmohan Singh has said. "December has given positive news particularly on the Central Excise front, as the collection increased by 9.7% after registering a decline in November," Goel said.

A rise in core sector growth to a four-month high 6.8% in November also suggests some revival. Economists are also viewing the revival in excise collections with optimism. "The December numbers are healthy and come as a positive surprise. Even PMI suggests that output in the month had picked up," said Shubhada Rao, chief economist, Yes bank.

"But it's too early to call this a turnaround in slowing industrial production... these figures need to continue," she added. Overall indirect tax collections rose 16.1% in the first three quarters, against the year-ago period, just short of the 17.3% rise needed to meet the Rs 3.97 lakh crore target.

Customs duty collections rose 4.1% to Rs 12,608 crore in December from Rs 12,109 crore in the same month a year ago. During April-December, the Customs collection was Rs 1,12,670 crore, up 13.8% year-on-year. Goel said a tightened administration and focussed audits had contributed to the rise in collections. "Small businesses have started paying the levy...Also, businesses that have exhausted their CENVAT credit had begun to pay in cash," he said.

Excise collection was Rs 12,546 crore in December and Rs 1,05,411 crore in the first three quarters. Service tax collection was Rs 9,665 crore in December and Rs 67,706 crore during April-December. The CBEC chief said that the extension of date to file service tax to January 6 has helped in increasing the collection of levy. He indicated that the deadline for service tax return may be further extended.

Finance minister Pranab Mukherjee held a review meeting with Central Board of Direct Taxes and CBEC officials of North Zone on Tuesday to take stock of tax collection scenario and asked them to further increase the realisation. The revised Budget estimates for both direct and indirect taxes are higher. The revenue collection estimate is .`7.89 lakh crore.

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