Indirect tax kitty dips, deepens slowdown fears

Reflecting an industrial slowdown in the face of a global financial crisis, the government's indirect tax collection took a hit, resulting in a five per cent fall in excise and customs collection during October.

First it was a dismal industrial growth rate of 1.3 per cent in August, then 15 per cent dip in exports in October, and now the fall in excise and customs collection from Rs 19,646 crore in October 2007 to Rs 18,664 crore last month, according to the data released by the Finance Ministry on Tuesday.

The decline in indirect tax collection comes at a time when the government is finding it hard to mobilise resources, while expenditure on subsidies and other welfare measures is going up.

The realisation from excise decreased by 8.7 per cent to Rs 9,265 crore from Rs 9,353 crore a year ago, while the collection from customs saw a decline of 0.9 per cent to Rs 9,399 crore as compared to Rs 10,293 crore during the same period last year.

Talking about the global financial meltdown, Prime Minister Manmohan Singh had said recently, "A crisis of this magnitude was bound to affect our economy and it has. International credit has shrunk with adverse effects on our corporates and our banks."

Declining revenue from major heads like customs and excise, coupled with an additional expenditure of over Rs one lakh crore, approved by Parliament recently, will derail the targets for the fiscal and revenue deficits envisaged in the Budget.

The government in the Budget proposed to reduce the fiscal deficit to 2.5 per cent of GDP from 3.1 in the previous year, while the revenue deficit was slated to be brought down to one per cent from 1.4 per cent.

Finance Minister P Chidambaram had indicated that India might exceed the Budget target for the fiscal and revenue deficits as the global economic crisis continues to exert pressure.

However, service tax collection grew by 18 per cent at Rs 5,766 crore during September from Rs 4,888 crore a year ago.

As far as revenue collection in the first seven months

(April-October) of the current fiscal is concerned, the realisation from customs and excise stood at Rs 1,31,943 crore against Rs 1,22,781 crore during the same period last year, showing an increase of 7.5 per cent.

For April-October, excise duty collection was Rs 66,621 crore in October compared to Rs 57,833 crore a year ago.

Worried over the falling excise collection, to check duty evasion, the government introduced a system to assess the liability of assesses through a third party from October.

The government targets a growth rate of 9.3 per cent at Rs 1,36,610 crore in excise duty this fiscal.

Revenue collected from customs duty for April-October was Rs 65,322 crore compared to Rs 64,948 crore a year ago.

Meanwhile, total service tax collected in April-October stood at Rs 29,867 crore compared to Rs 23,204 crore during the same period last year.

Source: ndtvprofit