Despite GDP cue, indirect tax kitty down 21%

A higher-than-expected growth rate has not brought any cheer to the government coffers. Indirect tax receipts for eight months (April-November 2009) has dipped 21 per cent to Rs 1,45,824 crore, despite an unexpected 7 per cent growth in Gross Domestic Product (GDP) and 7.1 per cent rise in industrial output till October.

The tax department, therefore, is likely to miss the tax collection target for this year.

Estimates show the government was able to garner only 46 per cent of its Budgetary target of Rs 2,69,477 crore for 2009-10, despite aiming lower than 2008-09 revised revenue collection of Rs 2,81,359 crore. It stood at Rs 1,84,000 crore in the same period last year.

The decline was primarily led by poor collections in customs duty, which fell 31.2 per cent to Rs 52,011 crore for April-November and 26.1 per cent to Rs 6,599 crore in November.

Two other components of indirect tax also showed a decline, according to finance ministry data.

Service tax collections, which did not react immediately to the economic downturn and continued to rise even when customs and excise collections were falling, dropped 6.6 per cent to Rs 32,793 crore in April-November 2009-10. Excise duty collections, too, fell 17.4 per cent to Rs 61,020 crore.

Decline in excise duty collections in November was only 1.2 per cent at Rs 8,454 crore. The total indirect revenue mop-up in the month was at Rs 18,920 crore.

R Muralidharan, executive director, PricewaterhouseCoopers, said, "The tax collections should have been 66 per cent of the target on a pro rata basis. Usually revenue collections pick up in the second half of the year. So, the target will be missed but the shortfall might not be so huge."

In the Budget in July, the government estimated excise, customs and service tax mop-up for 2009-10 at Rs 1,06,477 crore, Rs 98,000 crore and Rs 65,000 crore, respectively.

With only four months left in this year, service tax collections are half the way, while excise and customs are 42.7 per cent and 46.9 per cent, respectively, of the Budget estimate.

Despite revenue collections falling short of target, it may not put more burden on the fiscal deficit as GDP growth for the year is likely to be higher than expected at over 7 per cent. The government estimated the fiscal deficit at 6.8 per cent of GDP this year.

In April-October, too, indirect tax collections fell 21.6 per cent to Rs 1,26,903 crore, mainly due to 6 per cent reduction in excise duty and 2 per cent cut in service tax last year to help the industry tackle slowdown.

Customs duty collections have also been falling due to decline in imports and duty cuts on essential commodities.

Union Finance Minister Pranab Mukherjee had already said that indirect tax collection was an area of concern, but direct tax receipts may make up for the loss.

Direct tax receipts of Rs 1,83,822 crore in the first eight months of 2009-10 was half way of the target of Rs 3,70,000 crore.

Industry trend in advance tax collections showed 20 per cent increase to Rs 1,13,000 crore till December.

The government has set a total tax revenue target of Rs 6,41,079 crore for 2009-10, which is lower than previous year's Rs 6,87,715 crore. It is marginally higher than Rs 6,27,949 crore achieved last year.