Duty collections continue downward march

Excise and Customs duty collections, which form 82 per cent of indirect tax receipts for the government, have declined in November too, indicating further slowdown in the manufacturing activity.

While the excise duty, which is levied on goods produced, has shown a drop of 15 per cent in the collections, import duty receipts too have declined by 1 per cent, said a senior government official.

The fall is significant as excise and Customs receipts constituted nearly 40 per cent of government’s total tax collections of Rs 6,87,715 crore in 2008-09, according to the Budget estimates.

November will be the third consecutive month when the excise duty collections have been hit due to a slowdown in manufacturing. Excise duty collections declined by 8.7 per cent in October, followed by a 3.8 per cent dip in September this year.

The excise duty collections were Rs 10,110 crore in November last year. A 15 per cent dip would mean a collection of Rs 8,593 crore in November this year.

The Customs duty collections dipped by around 1 per cent for the second consecutive month, sources said, after declining by 0.9 per cent in October this year.

Customs duty collections were at Rs 8,497 crore in November 2007 and may have come down to around Rs 8,400 crore in November 2008.

Experts attribute slower economic growth and duty cuts announced this year to fight inflation as reasons for lower excise and Customs duty collections. In the meantime, the government has further cut excise duty by 4 percentage points on December 6 to give a boost to demand for manufactured products till March 31, 2009.

Excise, Customs and service tax sops announced by the government since April this year would result in a loss of over Rs 40,000 crore in tax revenue in the current fiscal. This would make it difficult for the government to achieve the indirect tax collection target of Rs 3,20,000 crore for the current financial year.

Direct tax collections have also declined by 36 per cent in November this year due to the economic slowdown.

The government was banking on buoyant tax collections to fund rising expenses due to the farm debt waiver scheme, higher pay to its staff and fiscal incentives to prop up the economy. The central government finances are likely to worsen as it will now resort to additional borrowing to meet its expense commitments.