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Indirect tax collections increased 37.3 per cent in May, says FM Arun Jaitley
June, 11th 2015

Indirect tax collections continued strong growth for a second consecutive month in May with 37.3% increase, indicating a pickup in the economy.

"Growth in indirect taxes is spread over across all the three categories — excise, customs and service tax," finance minister Arun Jaitley said on Wednesday, adding that this showed a pickup in manufacturing activity.

May collections rose 16.9% even after adjusting for increase in duties on fuel and withdrawal of tax incentives for automobile.

Tax revenues grew 39.2% for the first two months of the fiscal. After adjusting for higher duties on fuel and lapse of sops for the automobiles and consumer durables, cumulative growth stood at 12.6% in the April-May period.

According to Jaitley, strong collection growth for the second month in a row indicates that some green shoots are setting in. Manufacturing sector is finding feet one again, he said.

Indirect taxes, which include excise duty levied at factory gate, customs duty and service tax, collections are a good indication of consumption, production and rise in imports in economy.

Indian economy expanded 7.3% in FY15 and 7.5% in the January-March quarter, but most experts have not been convinced about it, saying it was not consistent with the other numbers, particularly tax revenue growth.

The indirect tax numbers should address some of those concerns. Domestic car sales, too, rose 7.73% in May, indicating good demand.

A strong increase in indirect tax collections the first two months of the financial year is also considered significant as usually it remains muted due to large outgo of tax refunds. It presents some good news on recovery setting in, which could get echoed when the industrial productions numbers are released. Core sector index, which measures the output of six infrastructure industries, had shrunk 0.4% in April from a year ago, according to the latest data.

Excise duty collections, particularly, have been robust at 82%. Asked if the increase in excise collection will be reflected in growth in factory data, the finance minister said, "Revenue is one indication. That's (IIP) another indication. So cumulatively we have to add up all this. Since it is a pattern which has continued for two months, it at least gives some green shoots." The government has budgeted s Rs 6.47 lakh crore in 2015-16 from indirect taxes.

 
 
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