Robust indirect tax collection indicates revival of economy

From The Hindu Business Line

For the first time in five years, the government is likely to meet the ₹14.49-lakh crore tax collection target for 2015-16 with robust indirect tax mop-up making up for the shortfall in direct levies. The Centre’s total tax collection touched ₹10.66-lakh crore between April 2015 and January 2016, which amounts to 73.5 per cent of the full-year target. Direct tax collections grew 10.9 per cent to ₹5.22-lakh crore, amounting to 65 per cent of the Budget Estimate, while indirect tax receipts grew at a robust 33 per cent to ₹5.44-lakh crore or 88 per cent of the Budget Estimate.

Backed by these buoyant numbers, Revenue Secretary Hasmukh Adhia is confident of meeting the Budgeted targets for tax collections this fiscal. “We are likely to exceed the collection in indirect tax by about ₹40,000 crore in the current year,” Adhia said adding that the high mop-up from Customs duty on machinery and service tax indicated a revival in economic activity.

“These are indicators of new investment taking place in the private sector for which machinery is being imported… It also indicates a high level of economic activity,” Adhia said, adding that the trends in tax collection also support the latest GDP growth numbers.

Data released by the Central Statistics Office on Monday pegged GDP growth at 7.6 per cent in 2015-16, a notch higher than the Finance Ministry’s estimate of 7-7.5 per cent growth this fiscal.

Adhia said there will be a small shortfall in direct tax collections, but it will be made good by the indirect tax collections. “We expect an additional ₹44,000 crore from it. We are very optimistic of achieving our annual target of tax revenue this year,” he said.

With a slowdown in economic activity, the Centre had lowered its tax collection projections in the last two financial years. In 2014-15, it had set a Budget Estimate of ₹13.64-lakh crore in tax revenues, but revised it down to ₹12.51-lakh crore by the end of the fiscal.

Corporate tax collections up

Within direct taxes, Adhia said corporate tax collections grew 10.44 per cent between April and January 31 while the personal income tax mop-up rose 11.85 per cent. However, indirect tax receipts were much more buoyant. Customs duty collections from electrical machinery grew 34.4 per cent in the first 10 months of the fiscal and that from other machinery rose 27.8 per cent.

Commenting on the trend in growth of service tax collections, Adhia said the average growth rate in the services sector was 27.2 per cent while that in banking and financial services was 44.6 per cent. In work contract services, it was 39.9 per cent and in goods transportation services, the growth rate was 41 per cent.

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