Customs duty collections that topped Rs18,000 crore in the first quarter fuelling hopes of economic recovery will lead to higher excise collections in Q2, by when the manufacturing sector would have consumed the already imported raw material.

We expect better figures in Q2 in excise collections. There is a lag of two-three months for the effect (import and
manufacturing output) to show in excise figures, CBEC chairman P C Jha told PTI in an interview.

The improved customs collections in Q1 is a signal that the manufacturing sector will also improve, which is evident from the initial reports on steel and cement sectors.

In imports, major components are raw materials and capital goods that means in future, manufacturing sector will improve, Jha said.

Net excise duty collections turned negative in the first month of this fiscal at Rs78 crore, according to figures released by the Controller General of Accounts.

This means that the government was paying more refunds than collections from excise duty in April. In May, the government collected Rs5,780 crore as excise duty. As such, collections for the first two months totaled Rs5,702 crore against Rs6,888 crore a year ago.

The CBEC chairman said excise collections were not very bad given the post Budget duty reduction last year. If you take it into account, the excise collection is not very bad.

Excise duty collections saw a dip owing to a sharp cut in rates as part of the governments stimulus packages to perk up the economy after the global slowdown in the second half of 2008.

In all, excise duty rates were cut by 6% to 8% 8%. Besides, service tax was also slashed by 2% from 12% to 10%.

Tax cuts in three stimulus packages announced since December last year had hit the exchequer by Rs52,000 crore, Jha said.
So far as the customs duty is concerned, it provided the government Rs17,858 crore in the first quarter against Rs16,766 crore in the preceding quarter.

In the Budget for 2009-10, the government projected excise duty collections to fetch Rs1,06,477 crore, lower than Rs1,37,874 crore as per Budget estimates of last fiscal and Rs1,08,359 crore in revised estimates.

Similarly, customs duty collections are pegged lower at Rs98,000 crore this fiscal against Rs1,18,930 crore in Budget estimates of last fiscal and Rs1,08,000 crore in revised estimates.