September growth barely up 1% after 5 buoyant months; adds to other recent slowdown indications.
Indirect tax collection data have added fuel to the fear of a slowdown, by growing at a meagre 1.2 per cent in September. Revenue from customs and central excise showed a drop from last year, as the government saw the full impact of duty cuts on petroleum products.
Indirect tax revenue for September 2011-12 was Rs 28,510 crore, against Rs 28,184 crore in the year-ago month. Customs collections, which fell 10.9 per cent to Rs 10,126 crore, compared with Rs 11,363 crore in September 2010-11, primarily contributed to the sluggish growth.
While growth in central excise collections showed a marginal drop of 0.3 per cent to Rs 11,417 crore, against Rs 11,447 crore in the corresponding period of last year, service tax collections remained robust, up 29.6 per cent to Rs 6,967 crore, against Rs 5,374 crore in the year-ago period.
The sharp decline in the pace of growth of indirect tax collections, which had remained buoyant in the first five months of the financial year, is another parameter hinting at an approaching slowdown.
Customs duty is an indicator of trade, while excise duty can give an indication of manufacturing activity. Imports grew 41.8 per cent to $38.4 billion, leaving a trade deficit of $14.1 bn for August. However, the growth in both exports and imports has decelerated. Eight core industries grew at the slowest pace in 11 months, at 3.5 per cent this August, while industrial growth had plummeted to a 21-month low of 3.3 per cent in July.
In June, the government had removed the five per cent customs duty on petroleum crude, brought down the import duty on petrol and diesel from 7.5 per cent to 2.5 per cent, and on other petroleum products to five per cent from 10 per cent. It also abolished the Rs 2.6 per litre basic excise duty levied on diesel, sacrificing Rs 49,000 crore a year.
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While service tax collections increased substantially, the HSBC Purchasing Managers’ Index showed private sector services activities contracted last month, for the first time since April 2009, which was a period of global financial crisis. The huge jump in service tax collections could be due to the introduction of Point of Taxation Rules, where the assessee has to pay service tax on an accrual basis to the government.
Indirect tax collections had grown at 24 per cent in August, but the sharp decline in customs and excise in September brought down the growth rate for a six-month period to 20.8 per cent. Net collections during April-September were Rs 1,68,670 crore, against Rs 1,39,652 crore last year.
Gross direct tax collections, on the other hand, have grown by 23 per cent to Rs 2,57,042 crore in April-September. Net direct tax collections, after refunds, were Rs 1,94,812 crore during April-September, up from Rs 1,81,758 crore in the same period last year.
The government has set a Budget target of Rs 5,32,000 crore for direct taxes and Rs 3,92,908 crore for indirect taxes in 2011-12.