Strong Re eats into indirect tax kitty

October 18, 2007 THE FINANCIAL EXPRESS

New Delhi, Oct 17 A stronger rupee is now making a dent in the government’s indirect tax kitty. While the Central Board of Excise and Customs (CBEC) is still hopeful of overcoming the effects of this phenomenon, it is beginning to get concerned about the low growth in customs and excise collections as the recent lower growth in the manufacturing sector has added to its worries.

In September 2007, customs collections rose 4.9% to Rs 7,975 crore compared to the 32.2% rise it saw in the same month in 2006 when it totaled Rs 7,604.

Official sources said customs duty collections have seen a significant dip in September mainly due to rupee appreciation. The stronger rupee has meant that the cost of imports has gone down and so customs valuations are lower. CBEC officials, however, ruled out any significant customs duty evasion, especially with the new valuation norms in place.

Customs and excise duty collections grew merely 10.8% in the first six months of the fiscal amounting to Rs 1,03,134 crore compared with Rs 93,108 in the same period last fiscal.

According to Budget estimates, customs duty receipts are expected to increase 20.01% to Rs 77,066 crore during 2007-08 while excise revenue is expected to increase 6.25% at Rs 1,19,000 crore.

Excise collections are not an exception. The excise duty collections rose 6.5% to Rs 54,654 crore in April to September 2007 as compared to Rs 51,334 crore in the same period last year. Excise collections, however, saw almost the same growth rate last fiscal growing by 6.7% to Rs 51,334 crore. In September 2007, the government collected Rs 10,186 crore as excise, an increase of 7.2% as compared to the 9% growth in September 2006.

With imports getting cheaper, many domestic manufacturers may now be importing from abroad instead of manufacturing locally, sources said. Also the lower output by the manufacturing sector in the recent months has meant lower excise collections for the government, a finance ministry official pointed out.

Lower excise duty collections may also be impacted by the stable oil prices, the official added. The petroleum sector provides about 50% of excise revenue and prices of petroleum products have remained constant too has made an impact on excise collections, he said, while admitting that there was also some amount of evasion.

The government is banking on service tax collections to bail it out. Official sources told FE, "We may not be able to reach our budgeted targets for

each of the taxes individually, but in totality we will be able to achieve whatever is there in the Budget. Service tax revenues are likely to continue pouring in and this may eventually bail us out.

http://www.financialexpress.com/news/Strong-Re-eats-into-indirect-taxkitty/229548/

With Thanks from THE FINANCIAL EXPRESS

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