The Government is betting on higher direct taxes collections to offset the expected shortfall in certain indirect tax components this fiscal.
There are indications at this stage that the Revenue Department might even in the current fiscal fall short of the Budget Estimates on the excise duty front.
The Centre’s indirect tax collections have taken a hit in 2009-10 on account of the duty cuts imposed in early 2008-09 on certain petroleum products and also due to the three rounds of stimulus packages rolled out in second half of last fiscal.
“The likely shortfall in indirect tax components is expected to be compensated with higher collections in direct tax components,” the Finance Minister, Mr Pranab Mukherjee, told the Lok Sabha on Friday, replying to the discussions on the first batch of supplementary demands for grants for 2009-10.
The Lok Sabha later gave its nod for the first batch of supplementary grants, which will allow the Government to additionally spend Rs 30,942.62 crore, of which net cash will be Rs 25,725.22 crore (including provision of Rs 3,139.90 crore for transfer of disinvestment receipts already received in the consolidated fund of India to the National Investment Fund).
Meanwhile, all the three components of indirect taxes – excise, customs and service tax – recorded negative growth rate during April-November 2009 on a year-on-year basis.
While Customs duty collections declined 31.2 per cent during April-November 2009 at Rs 52,011 crore, excise duty collections in the same period are down 17.4 per cent at Rs 61,020 crore. Service tax collections declined 6.6 per cent to Rs 32,793 crore during April-November 2009, latest data available with the Revenue Department showed.
The Centre’s gross tax revenue collection up to October 2009 shows a decline of 7.5 per cent over the same period in 2008. This is primarily attributed to steep decline in indirect tax components, namely union excise duties and customs. Mr Mukherjee pointed out that in 2008-09, the indirect tax rates were higher during this period.
The Finance Minister’s remarks on likely shortfall in certain indirect tax components caused some ripples in the stock markets. Many capital market observers felt that the less-than-expected industrial output performance for October 2009 and the possible shortfall in indirect tax collections resulted in some negative sentiment, leading to decline in the benchmark indices.
On the proposed Direct Taxes Code, the Finance Minister assured the Lok Sabha that he was open to suggestions. “I do not have a closed mind on this. It (direct taxes code) is not Bhagwat Gita and that it cannot be changed,” he said.
