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Indirect tax kitty swells close to revised target
April, 16th 2010

Governments indirect tax kitty, which was hit the most due to the stimulus packages given by the government to tide over economic slowdown, has almost met the revised collection target for 2009-10 at Rs 2.41 lakh crore.

According to official sources, indirect tax collections till March 31 are over 99% of the revised estimate of Rs 2.44 lakh crore, though a decline of 8.6% compared to the previous fiscal collections.

The lower indirect taxesexcise, customs and service tax was a result of the double whammy of reduced profit margins of the industry due to economic slowdown and then the tax cuts in the stimulus given to the industry to tide over the slowdown.

In the last fiscal, the government collected Rs 84,542 crore as customs duty, 15.2% lower compared to the previous fiscal. Excise collections were 2.4% down at Rs 1.01 lakh crore compared to 2008-09. Service sector also took a hit giving service tax at Rs 55,731 crore, 8.2% lower than the previous period.

In the financial year 2009-10, the customs duty collection did meet the revised target. Proceeds from excise duty have also just about met the revised target, if cesses administered by various departments included in RE estimate are not counted. Service tax, the area where the government bets upon in terms of low collections, is the only one among the three indirect tax components where the revised target could not be met. Government could collect only 96% of the revised target for service tax kitty during the last fiscal.

The government had set an indirect tax collection target of Rs 2.67 lakh crore in the beginning which was later revised to 2.44 lakh crore, keeping in view the economic scenario.

The Indian economy, however, is improving now so the future collections are expected to improve, also because there was a partial rollback of the stimulus with excise duty rates being hiked by 2% in the Budget this time. Finance minister Pranab Mukherjee, while presenting the Budget for 2010-2011, rolled back the stimulus partially noting that the signs of economic recovery are quite visible unlike the last budget when the country was faced by a financial crisis.

The March collections for indirect taxes seem to have improved as the government had only collected Rs 2.09 lakh crore till February, improving the average collections each month during April-February period to around Rs 40,000 crore.

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