In the clearest indication so far that the much-talked-about green shoots arent an optical illusion, excise tax collections in August were up 22.5% over the previous month, though still a touch lower than the figure for August 2008.
Given the fact that excise duties reflect whats happening to all kinds of manufactured goods, this is arguably a more broad-based indicator of industry recovering than the index of industrial production (IIP).
Sources told TOI that central excise duty collections in August were Rs 8,979 crore, about 8.8% below the Rs 9,846 crore collected in the same month last year. What makes that good news is the fact that July collections of Rs 7,332 crore this year were 28.5% lower than last Julys mop up of Rs 10,255 crore. With the much improved showing in August, the government is now hopeful of meeting the target of Rs 2.7 lakh crore set for indirect taxes in the Budget for 2009-10.
There is some bad news for industry though. A senior official from the Central Board of Excise and Customs (CBEC) said if the upward trend continues for another couple of months, the government may reconsider the tax concessions it had extended in the second half of the last fiscal.
The government has been keen on reverting to the path of fiscal consolidation at the earliest, but has so far been cautious of the fact that this should not hamper industrial recovery.
Last week, finance minister Pranab Mukherjee had said on the sidelines of a meeting of the chief commissioners and director generals of CBEC that the huge shortfall in July as compared to the previous year had been due to the overall slowdown of the economy and the effect of stimulus measures through reduction of excise duty rates.
The finance minister had nevertheless expressed optimism that the indirect tax target was very much within reach as the trends were indicative of a rebound by the third quarter.
The tax base of indirect taxes has grown steadily and as a share of GDP has gone up from 9.2% in 2003-04 to 12.6% in 2007-08.