Indirect tax receipts registered a sharp rise in the first two months of the current fiscal, allaying concerns somewhat that the tight monetary policy being pursued by the Reserve Bank of India is crimping demand. The more-than-expected rise in revenue could also make it easier for the government to meet its fiscal deficit target of 4.6% of the GDP.
The government's excise duty collections, an indication of factory production, posted a smart 38.4% jump to Rs 11,586 crore in April-May, compared to the year-ago period. Revenue from Customs rose 37% to Rs 25,176 crore and service tax mop-up was 27.6% higher at Rs 7,722 crore in the two months. "Indirect taxes collections have been robust in the first two months of the current fiscal, but there could have been some spillover in excise in April from the previous fiscal," SD Majumder, chairman, Central Board of Excise and Customs told ET.
The trend in indirect tax revenue is sure to offer some respite to the finance ministry that has been sweating over its budget arithmetic going horribly wrong because of the slowdown. A series of data in recent weeks have conclusively pointed towards cooling economic growth.
Industrial output growth is at a seven-month low while car sales in May rose at their slowest pace in two years. The indirect tax collections are being seen as a glimmer of hope in such a scenario. The growth in excise collections is well in excess of what 6.9% growth in manufacturing in April should have delivered. Excise is levied on production of goods at a median rate of 10%. Customs collections, however, are broadly in line with imports, which expanded 33% in the first two months. A likely slowdown in revenues due to a slowing economy, and soaring subsidies, particularly on petroleum products has threatened to throw North Block fiscal calculations awry.
"The current financial year is going to be a challenging one. We will have to see if any mid-course revision in target is required," CBEC Chairman Majumdar had said at the annual conference of Central Board of Excise and Customs last week.
North Block has been scrambling to locate new sources of revenue. Ministries have been asked to stay within budgets, and those offering services, to review the prices they charge and see if they can be raised.
The finance ministry has also asked for a speedy auction of more telecom airwaves, hoping for a bonanza like the one in the last fiscal. Auction of third generation or 3G spectrum last year had fetched the government over Rs 1 lakh crore against the budgeted Rs 35,000 crore.
Those plans may still be needed. Economists say demand will fall sooner than later, as interest rates begin to bite. The most discretionary of them all -- car sales -- rose only 7% in May against nearly 30% rise in 2010-11. "Demand is still strong but going forward could moderate," said DK Joshi, chief economist at Crisil .
"Higher interest rates are not positive for the growth outlook, but we are yet to see major impact on the economy, especially when we see the IP (industrial production) data," wrote Deutsche Bank economist Taimur Baig in a note on June 10.
The government's excise duty collections, an indication of factory production, posted a smart 38.4% jump to Rs 11,586 crore in April-May, compared to the year-ago period. Revenue from Customs rose 37% to Rs 25,176 crore and service tax mop-up was 27.6% higher at Rs 7,722 crore in the two months. "Indirect taxes collections have been robust in the first two months of the current fiscal, but there could have been some spillover in excise in April from the previous fiscal," SD Majumder, chairman, Central Board of Excise and Customs told ET.
The trend in indirect tax revenue is sure to offer some respite to the finance ministry that has been sweating over its budget arithmetic going horribly wrong because of the slowdown. A series of data in recent weeks have conclusively pointed towards cooling economic growth.
Industrial output growth is at a seven-month low while car sales in May rose at their slowest pace in two years. The indirect tax collections are being seen as a glimmer of hope in such a scenario. The growth in excise collections is well in excess of what 6.9% growth in manufacturing in April should have delivered. Excise is levied on production of goods at a median rate of 10%. Customs collections, however, are broadly in line with imports, which expanded 33% in the first two months. A likely slowdown in revenues due to a slowing economy, and soaring subsidies, particularly on petroleum products has threatened to throw North Block fiscal calculations awry.
"The current financial year is going to be a challenging one. We will have to see if any mid-course revision in target is required," CBEC Chairman Majumdar had said at the annual conference of Central Board of Excise and Customs last week.
North Block has been scrambling to locate new sources of revenue. Ministries have been asked to stay within budgets, and those offering services, to review the prices they charge and see if they can be raised.
The finance ministry has also asked for a speedy auction of more telecom airwaves, hoping for a bonanza like the one in the last fiscal. Auction of third generation or 3G spectrum last year had fetched the government over Rs 1 lakh crore against the budgeted Rs 35,000 crore.
Those plans may still be needed. Economists say demand will fall sooner than later, as interest rates begin to bite. The most discretionary of them all -- car sales -- rose only 7% in May against nearly 30% rise in 2010-11. "Demand is still strong but going forward could moderate," said DK Joshi, chief economist at Crisil .
"Higher interest rates are not positive for the growth outlook, but we are yet to see major impact on the economy, especially when we see the IP (industrial production) data," wrote Deutsche Bank economist Taimur Baig in a note on June 10.
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