Moderation in economic growth has started affecting the government’s kitty, which may pose a problem for its fiscal consolidation efforts. After gross direct tax collections registered a marginal dip in October, the Centre’s indirect tax revenue dropped 2.5 per cent to Rs 30,278 crore in October. Analysts attributed the decline to cut in duty rates in petroleum products as well.
Collections from indirect taxes, comprising customs, excise and service tax was at Rs 31,058 crore in October.
Customs duty collections dropped 11.6 per cent in October to Rs 11,357 crore, from Rs 12,849 crore in the year ago period, Finance Ministry officials said. The central excise collections fell 5.3 per cent to Rs 10,527 crore for a second month in a row from Rs 11,120 crore in October.
In June, the government had cut customs and central excise duties on petroleum products to provide a relief to consumers from the hike in petrol prices that month. The cut meant an annual loss of Rs 49,000 crore to the central exchequer. The decline in the total indirect tax collections in October would have been much sharper but for the 18.4 per cent growth in realisation from service tax, officials said.
Service tax collections during the month rose to Rs 8,394 crore from Rs 7,089 crore in October 2010.
However, during April-October period, the indirect tax collection showed 17.8 per cent increase to Rs 2.01 lakh crore from Rs 1.70 lakh crore during the corresponding period in the last financial year.
The increase during the first seven months of the current fiscal was on account of higher collections from customs, central excise and service tax, which rose by 16.6 per cent, 10.6 per cent and 33.6 per cent, respectively.
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During the April-October period customs collection was Rs 86,156 crore (up from Rs 73,895 crore during corresponding period of last fiscal), central excise at Rs 69,511 crore (Rs 62,838 crore) and service tax at Rs 45,391 crore (Rs 33,977 crore).
The decline in indirect tax collection during the later part of the financial year can be attributed to poor performance of the industrial sector as well.
Industrial production during April-August moderated to 5.6 per cent from 8.7 per cent during the corresponding period in 2010-11.
The Centre’s gross direct tax collections also declined 0.61 per cent to Rs 27,039 crore in October over 27,205 crore in the same month last year. The Centre's fiscal deficit, which is excess of its expenditure over revenues, for the first six months was already 68 per cent of the budget estimate for entire 2011-12 because revenues are not keeping pace with expenditure.
Economists said fiscal deficit target of 4.6 per cent of GDP for this fiscal deficit is out of question.