Indirect tax kitty swells 46%

Business standard New Delhi August 13, 2010

In yet another sign of economic recovery, indirect tax collections in the first four months (April-July) of this financial year jumped 46 per cent to Rs 96,223 crore, compared with a mop-up of Rs 65,816 crore in the corresponding period of 2009-10.

The growth is led by a whopping 71 per cent increase in Customs duty receipts to Rs 41,545 crore, against Rs 24,323 crore in the same period last year, indicating a surge in India’s trade.

Excise duty collections also showed a sharp 43 per cent rise to Rs 38,260 crore in April-July 2010-11, against Rs 26,792 crore in the corresponding months last year. Service tax and receipts, however, showed 12 per cent growth to Rs 16,418 crore, compared with Rs 14,685 crore in the year-ago period.

Apart from increase in the volume of exports and imports, which increased by 32 per cent and 34 per cent, respectively in April-June, finance ministry officials attributed the growth to the increase in petroleum duty. In the Budget announced in February, the finance minister had restored the basic 5 per cent Customs duty on crude petroleum, 7.5 per cent on diesel and petrol and 10 per cent on other refined products. It had also enhanced the excise duty on petrol and diesel by Re 1 per litre each.
 

“The growth is good because the economy is gaining momentum. Excise collections improved as the government increased the duty by 2 per cent to 10 per cent in the Budget. Besides, the manufacturing activity has picked up,” said a finance ministry official. He said growth in service tax receipts was normally above 20 per cent, but this time it had come down due to litigations on some services.

The collection has also remained low as the government has not yet rolled back the 2 per cent cut in service tax.

For the current financial year, the government has set an indirect tax collection target of Rs 3,15,000 crore. The collections in the first four months are over 30 per cent of the total estimate.

In the month of July alone, revenue collections from Customs rose 74 per cent to Rs 11,257 crore from Rs 6,467 crore, while the overall growth was 42 per cent, with the collections standing at Rs 27,761 crore, compared with Rs 19,606 crore in July 2009.

The high growth could partly be due to the low base. Indirect tax collections remained muted in 2009-10 as the economy had not fully recovered from the impact of the global financial meltdown. The government had to revise its Budget target of indirect tax receipts to Rs 2,44,447 crore from Rs 2,68,000 crore. The revenue department managed to mop up about Rs 2,000 crore more at Rs 2,46,000 crore.