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Soaring indirect tax collection points to robust economy
August, 11th 2011

Despite the duty cut on crude and petroleum products in June, indirect tax collections in July registered a 27 per cent growth. The Chairman of Central Board of Excise and Custom, Mr S. Dutt Majumdar, told Business line, The current rate of growth shows that economy is on the strong path.

These numbers are for the first full month since the duty reduction on crude, petrol and diesel on June 25.

Excise duty collection rose five per cent in July. Had it not been for the cut in excise duty, which is collected at the factory gate, Mr Majumdar felt that the growth would have been over 18 per cent. The reduction in excise duty cost the Government Rs 1,600 crore in just one month. In June, to protect the consumers as well as the public sector oil marketing companies from volatility in global crude oil prices, the Government had lowered the Customs duty on crude from five per cent to zero with corresponding reduction in the Customs duty on petroleum products. At the same time, the excise duty on diesel was reduced by Rs 2.60 a litre.

It is estimated that the Government will incur an annual net loss of Rs 26,000 crore (net of States' share) during the current financial year because of the restructuring of duties.

Although the CBEC is excited over the growth of Customs and excise duty collections, it is cautious over the 50 per cent growth in service tax collections. We should not be elated (over service tax collection). We must remember that this is the first month after the point of taxation was introduced and tax paid on the accrual basis. We cannot expect the same growth for the coming months, sources said.

Despite the significant growth in service tax collections, the Board is working hard to plug loopholes to further increase the numbers. It wants to focus on those that have stopped filing returns, especially the high-valued assessees. . The Board estimates that nearly 6 lakh, out of 15 lakh service tax assesses, have stopped filing returns. The Board fears some of them might be defaulters.

We have been treating service providers with kid glove. They have to reciprocate, if they don't, law will take its own course, warned a senior Finance Ministry official.

The Government aims to collect nearly Rs 4 lakh crore through indirect taxes. Although slowdown in manufacturing and duty reduction on crude and petro products are creating an impression that the target may not be achieved, with the latest figure the Finance Ministry is hopeful of meeting the targets.

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