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Stimulus packages to continue: FM
September, 09th 2009

Indirect tax kitty likely to improve in Q4.

Finance Minister Pranab Mukherjee today said the government had no exit strategy for incentives announced as part of the stimulus packages, even as there has been a 28 per cent fall in indirect tax collections till July.

At the G-20 meeting, we had already said that the world economy is not yet out of the woods and that stimulus packages will continue for some time to help the economy recover, said Mukherjee after a meeting with chief commissioners of Customs, central excise and service tax.

He further said the government was ready to take improved measures to combat drought, which has affected 272 districts in the country.

These measures have significant financial implications. The fiscal deficit is presently on the higher side and the government is determined to revert to the path of fiscal consolidation at the earliest, he added.

Mukherjee said though there was a 28 per cent decline in annual indirect tax collections till July, the situation is expected to improve in the fourth quarter of the current financial year. The government has set a target of Rs 2.7 lakh crore for indirect tax collections during the current year.

He said this was the effect of pre- and post-Budget fiscal incentives and slow international trade. This trend reflects the overall slowdown of the economy and the effect of stimulus measures through reduction of central excise duty rate.

Despite such limitations, the Central Board of Excise and Customs (CBEC) will adopt innovative ways of meeting the revenue shortfall, Mukherjee said in his speech to CBEC officials.

The finance minister also discussed the introduction of the proposed dual Goods and Services Tax (GST) by April 1, 2010. Mukherjee said he would discuss the progress in introducing the tax with state finance ministers at a meeting on September 16.

The minister also said that while there was a gradual thaw in the winter of economic crisis and the early green shoots of economic recovery, the situation was still far from normal. Indias exports to major traditional markets in the developed economies has contracted in the last 10 months.

To combat the downturn in the economy, the government had announced a slew of measures, including reduction in indirect taxes, to put more money into the hands of consumers, Mukherjee said.

In this years Budget, in tune with the governments commitment towards inclusive growth, there have been larger financial outlays in social sectors like health, education and for improvement of rural and urban infrastructure. The deficient monsoon has raised a spectre of drought in large parts of India, said the finance minister.

Mukherjee said while central excise continued to be the bulwark of indirect tax collection, service tax is the new sunrise area for widening the tax base and improving revenue collection. The role of Customs as revenue generator has diminished, but its role in facilitation of international trade continues to grow.

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