The Centre may not be able to meet the revised gross tax revenue target for the current fiscal for the first time in the last three years due to continued decline in excise and Customs duty collections and a likely drop in the fourth quarter advance income tax payment by companies.
Excise duty and Customs duty collections have declined in February while service tax collections have grown at a slower rate than the previous few years, making it difficult for the government to meet the revised gross tax revenue target of Rs 6,27,949 crore for the fiscal year ending March 31.
Riding the buoyancy in the economy, the revised targets were surpassed in 2006-07 and 2007-08. The actual collections had lagged revised targets between 2000-01 and 2005-06.
Revenue department officials attribute the dip in excise and Customs collections in February to continuing slowdown in manufacturing, dip in imports and a cut in excise duty rates last month to bail out industry. Collections of service tax, which is a progressive tax, have also grown at a slower pace.
In April-February 2008-09, excise duty collections declined around 6 per cent, Customs duty collections increased about 1 per cent (as against the required growth rate of 3.7 per cent) while service tax collections rose around 22 per cent (as against the requirement of 27 per cent), officials said. The indirect tax collections in April-February were about Rs 2,30,000 crore and about Rs 51,000 crore is needed to be collected in March to acheive the revised target for 2008-09.
The government had revised downward the indirect tax (central excise, Customs and service tax) target for the current fiscal by Rs 40,000 crore to Rs 2,81,359 crore after it cut tax rates, first to fight inflation and then to boost demand to tackle the deepening slowdown.
Direct tax collections are not better off either. The fourth quarter advance tax collections to be paid by the companies would determine whether the target would be met or not, officials said. If advance tax collections from companies are lower than the Rs 40,000 crore collected in the fourth quarter of fiscal 2007-08, meeting the revised direct tax collection target for the current fiscal will be difficult, said an official. Advance tax paid by companies had dipped 22 per cent in the third quarter of the current fiscal.
The direct tax collections, including advance tax and tax deducted at source, needs to be over Rs 85,000 crore in March this year if the revised target is to be achieved. The collections were Rs 80,000 crore in March 2008.
An official of a large public sector oil marketing company said the firm might pay lower advance tax in the fourth quarter compared with the corresponding period of the previous fiscal. The payment is due on March 15.
As sales are down, the story may be the same for other oil marketing firms.
The direct tax collection target was revised downward by Rs 20,000 crore to Rs 3,45,000 crore for 2008-09 after taking into account the impact of the ongoing economic slowdown on corporate profitability.