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Wednesday, Aug 07, 2002

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Drought likely to hit tax collections

Hema Ramakrishnan


THE Finance Ministry apprehends that the buoyancy in tax collections during the first quarter may not be sustained in the coming months. The country's worst ever drought in 15 years is likely to impact revenues, particularly in the second half of the fiscal which is the normal period for a pick-up in industrial activity and excise collections.

According to a senior Revenue Department official, data on indirect tax collections for July already indicate a slowdown in collections relative to the point-to-point growth rates in the preceding three months.

"These are preliminary trends and the deceleration is mainly in customs. The actual impact of the drought on revenue collections, especially excise, will be known at harvest time towards end-September. Any decline in farm incomes would automatically reduce spending and in turn impact tax collections,'' the official pointed out.

According to official estimates, actual excise collections up to July 15 stood at Rs 20,314 crore, marking a 21.25 per cent increase over the corresponding period last year. The growth is more or less in tandem with the 21.56 per cent increase registered during the first quarter which saw excise collections rise to 17,477.03 crore as compared to Rs 14,377.01 crore during April-June 2001.

But on the other hand, customs collections, which rose by 18 per cent to touch Rs 9,990.71 crore during April-June 2002, has staged a noticeable deceleration in the month of July. Cumulative revenues from this source during April to July 15, 2002 stood at Rs 11,683 crore, clocking a modest seven per cent growth over the corresponding period last year. The easing of oil prices coupled with the sluggishness in non-oil imports and weakening dollar are being cited as the reasons for the deceleration in customs revenue.

On the direct taxes front, the Finance Ministry has obtained a feedback of a slowdown in revenues in the Mumbai zone during April to end-July.

According to data independently collated by the Controller General of Accounts, overall collections (both direct and indirect) are up by 21 per cent so far this year.

Meanwhile, the mandate of the Task Force announced by the Finance Minister, Mr Jaswant Singh, to look into different aspects of indirect tax laws and administration will be restricted to simplification of procedures.

The Task Force would not give any recommendation on the rate structure in excise or customs, which have, in any case, been rationalised over the last couple of years, said a senior official.

"The objective of the exercise is to adopt procedures which the assessee finds both simpler and cheaper to comply with,'' the official added.

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