Indirect tax revenue keeps slowdown fears alive

Indirect tax revenue rose only 7.5 per cent to Rs 44,384 cr in October from Rs 41,290 cr in the corresponding month a year ago

Indirect tax revenue rose 7.5 per cent to Rs 44,384 crore in October from Rs 41,290 crore in the corresponding month a year ago, indicating woes of economic slowdown might not be over yet.

Customs, excise and service tax collection increased 5.6 per cent to Rs 2.85 lakh-crore in the first seven months of 2014-15 from Rs 2.69 lakh-crore in the corresponding period a year ago. Indirect tax collection so far is 45.7 per cent of the Budget estimate of Rs 6.23 lakh-crore. This has widened the fiscal deficit to 83 per cent of the Budget estimate.

Finance Minister Arun Jaitley had said meeting the indirect tax collection target will be a challenge unless economic growth revives. The government has targeted 20 per cent growth in indirect tax collection in 2014-15 from Rs 5.19 lakh-crore in the revised estimate for the previous year.

The growth in indirect tax revenue in the first seven months of the year is similar to the 5.3 per cent growth in the corresponding period of 2013-14, when collections fell 8.04 per cent short of the Rs 5.65-lakh -crore Budget estimate.

Customs collection grew 19.5 per cent to Rs 16,800 crore in October on high imports and softening crude oil prices. In September, the trade deficit had doubled because of a phenomenal rise in gold imports, which draw 10 per cent Customs duty.

Excise collection grew 1.4 per cent to Rs 14,169 crore in October because manufacturing might not have revived adequately in the festival month. Services tax collection also rose 1.2 per cent to Rs 13,415 crore.

For the first seven months of 2014-15, Customs revenue rose 7.5 per cent to Rs 1.06 lakh-crore, 52.6 per cent of the Rs 2.02 lakh-crore Budget estimate. Excise collection shrunk 1.2 per cent to Rs 88,330 crore, 43 per cent of the Rs 2.05-lakh-crore estimate. And, service tax collection was only 42 per cent of the target Rs 2.16 lakh-crore. If indirect tax collection does not rise in coming months, with disinvestment and spectrum sales not forthcoming, it could become difficult for the government to contain the fiscal deficit at 4.1 per cent of the gross domestic product without big spending cuts.