Slowdown Takes Toll Of Revenue Collections

Revenue collections have dropped well below target in the wake of the present economic downturn. According to the latest data, excise collections between April 1997 and January 1998 grew just 5.5 per cent over the corresponding period in the previous year, while customs receipts actually dipped 4 per cent in the same period.

These figures compare unfavourably with the budget target of 13 per cent for excise (estimated to net Rs 52,200 crore) and 19 per cent for customs (Rs 52,550 crore). Sources said the growth in excise collections was unlikely to offset the decline in customs, which could result in an overall decline in revenue collections compared with 1996-97.

 

The direct taxes story is no different, with collections growing at 2.5 per cent between April and December 1997, compared with the annual growth target of 15 per cent. The collection targets for 1997-98 have been fixed at Rs 21,860 crore from corporation tax and Rs 21,700 crore from income tax.

Officials attributed the disappointing revenue collections to the economic downturn. We cannot generate revenue, we can only collect taxes. So if the economy is not doing well, revenue trends have to be seen in a similar context, they said.

Gross domestic product growth, which was projected at 7 per cent when the budget was presented last February, was scaled down to 6 per cent in October when the busy season credit policy was announced. GDP growth projections have now been revised further to around 5 per cent.

Worse still, the industrial sector is now expected to average only 4.5-5 per cent compared with the initial estimate of 6 per cent. has also affected indirect tax collections. Officials explained that the growth of around 11 per cent in non-oil imports did not mean anything since duty is not levied on most of these goods. According to them, imports of dutiable goods have only increased by 1 per cent so far in the present year.

Further, with inflation still firmly under check, any buoyancy in revenue collections has been foreclosed. This is because most of the duties are ad valorem in nature and hence vary with price changes. Further, the finance ministry has dropped tariffs by nearly 15-20 per cent to an average level of 40 per cent in the current fiscal.

Senior government officials maintained that direct tax collections have been below par because of the unexpected surge in collections under the Voluntary Disclosure of Income Scheme (VDIS).

According to the officials, a large number of tax payers have diverted their funds towards payment of tax obligations under the amnesty scheme, which closed on December 31, 1997.

Under the income-tax law, if an individual misses out on the December 15 deadline for advance tax, the balance can be paid by March 15 at a penalty interest of 2 per cent per month. Since the assessees have to pay the interest charge in any case, it makes sense for them to pay up the advance tax on March 15, explained officials.