Tax collection growth poised to dip

Chidambaram is expecting high growth in service tax, Customs, corporation tax and income tax.

Despite a bleak outlook on excise collection, Finance Minister P Chidambaram is betting on tax revenues to grow by 19.35 per cent in 2006-07 to Rs 3,27,205 crore from the Rs 2,74,139 crore estimated in 2005-06.

The projected growth rate is marginally lower than the 21.94 per cent growth estimated for 2005-06.

With capital receipts projected to show a marginal increase of Rs 295 crore to Rs 1,60,526 crore, Chidambaram is expecting high growth in service tax, Customs, corporation tax and income tax to meet revenue projections.

The government has slashed its projections on total borrowing, which is estimated to grow by 1.71 per cent (Rs 2,511 crore) to Rs 148,686 crore. In 2005-06 it is estimated to grow by 16.75 per cent to Rs 1,46,175 crore from Rs 1,25,202 crore from a year ago.

With the service tax collection estimated to grow by 61.97 per cent (Rs 8,800) to Rs 23,000 crore in the current fiscal year, Chidambaram has set a target of 50 per cent growth (Rs 11,500 crore) to aim at Rs 34,500 crore in 2006-07 from the Rs 23,000 crore estimated in 2005-06.

Despite Customs collections growing at 11.46 per cent in 2005-06, the finance minister has set an ambitious target of 20.01 per cent growth (Rs 12,851 crore) to target Rs 77,066 crore in 2006-07 from Rs 64,215 crore estimated this year.

The corporation tax is projected to grow by 28.42 per cent in 2006-07 to yield Rs 1,33,010 crore, up from the Rs 1,03,573 crore estimated in 2005-06. The growth is estimated at 25.26 per cent (Rs 20,893 crore) in the current fiscal year.

The income tax collection growth target for 2006-07 has been set at relatively modest 16.86 per cent (Rs 11,170 crore) to Rs 77,409 crore, up from Rs 66,239 crore in 2005-06, during which it is expected to grow by 34.47 per cent. This is expected to provide a cushion to the finance minister.

Excise is the other major tax where growth projections of collection have been set lower at 6.25 per cent (Rs 7,000 crore) to target Rs 1,19,000 crore, up from the Rs 1,12,000 crore estimated in 2005-06. The current year's collections are estimated to grow by 12.98 per cent (Rs 12,875 crore).

Non-tax revenue is projected to grow by Rs 1,925 crore to Rs 76,260 crore from Rs 74,335 crore (in 2005-06, it fell by Rs 6,880 crore).

Overall revenue receipts are expected to grow by 15.78 per cent (Rs 54,991 crore) to Rs 4,03,465 crore in 2006-07. In the current fiscal year, the revenue receipts target of Rs 3,51,200 crore is estimated to fall Rs 2,726 crore short.

On the capital receipts front, recoveries of loans are projected to decline to Rs 8,000 crore in 2006-07 from Rs 11,700 crore this fiscal year, and other receipts are projected to grow to Rs 3,840 crore from Rs 2,356 crore.

The government's net internal debt borrowings are estimated to grow by 13.35 per cent to Rs 1,13,778 crore, up from Rs 1,00,373 estimated in 2005-06. The external assistance is projected to grow to Rs 8324 crore, up from 7,515 crore estimated in 2005-06.