Indirect tax collection exceeds revised estimate by Rs 4,000 cr

However, meeting the fiscal deficit target may require expenditure cuts

The Centre, struggling to rein in its fiscal deficit at 4.1 per cent of gross domestic product (GDP) in 2014-15, has received good news on the indirect tax front: Collections under this head exceeded the revised estimate (RE) by Rs 4,000 crore.

Even then, the government will require more expenditure compression than projected in the RE, as expenditure has to be less than receipts by Rs 90,000 crore in March for the government to meet the fiscal deficit target.

Indirect taxes — customs duty, excise duty and services tax — yielded Rs 5.46 lakh crore against the RE of Rs 5.42 lakh crore, despite a slowdown in industry in volume terms. The collections were also 9.9 per cent higher than the Rs 4.97 lakh crore of 2013-14, an official statement said here.

Finance ministry sources said the break-up of the figures were not immediately available.  

A part of indirect taxes, excise duty, primarily comes from industrial, particularly manufacturing, growth.

The Index of Industrial Production (IIP) has not picked up much: It grew just 2.5 per cent in the first 10 months of the financial year, against 0.1 per cent in the corresponding period of 2013-14. Within IIP, manufacturing rose 1.7 per cent in April-January, against contraction of 0.3 per cent in the year-ago period. The slowdown reflected in the RE, as excise duty collections were drastically cut to Rs 1.88 lakh crore from Rs 2.02 lakh crore in the Budget estimate (BE). This was despite the fact that the four-round increase in excise tax on petroleum is estimated to have given the government around Rs 20,000 crore extra since November, 2014.

To put it in perspective, indirect tax collections exceeded the RE by Rs 4,000 crore; but were way behind the Budget estimates, which stood at Rs 6.24 crore.

The government showed its intention to cut heavy expenditure in the RE when estimates were Rs 1.14 lakh crore lower at Rs 16.81 lakh crore from Rs 17.95 lakh crore in the BE.

The government would need more cuts in expenditure than shown in the RE. It got Rs 10,791 crore from the auction of telecom spectrum in March. However, the government had pegged the spectrum charges, auction and licence fee for telecom companies to yield more than Rs 43,000 crore in the RE and this sum must have been accounted for in the estimates.

As such, only Rs 4,000 crore extra from indirect tax receipts might be insufficient to ensure the fiscal deficit meets the target. Also, the government might have a shortfall on the direct tax collections front, even against the RE.

The Centre’s fiscal deficit crossed the RE by 17.5 per cent in April 2014-February 2015.

The fiscal deficit stood at Rs 6.02 lakh crore in the first 11 months, against the RE of Rs 5.12 lakh crore. This means the government would have had to ensure a fiscal surplus of around Rs 90,000 crore in March.