Revenue Dept too feeling the inflation pinch

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Mr Sunil Mitra, Revenue Secretary
Mr Sunil Mitra, Revenue Secretary

Our Bureau

New Delhi, Jan. 24

Blaming inflation, the Revenue Department expects to achieve only a lower tax to Gross Domestic Product (GDP) ratio of 10.6 per cent in 2010-11. This is despite the Finance Minister raising the revenue collection targets for the current fiscal on Sunday.

“Despite the latest hike in targets and our best efforts, we will not be able to do 10.8 per cent as we did last year. If we are able to meet our targets (revised), we will end the current fiscal with tax-GDP of 10.6 per cent because of inflation. But in the next year, we expect to do better than this,” said the Revenue Secretary, Mr Sunil Mitra, at an event organised by the Central Board of Excise and Customs (CBEC) here.

Mr Mitra later told reporters that the economic advisors to the Finance Ministry have conveyed to him that inflation is likely to be 9 per cent by the end of this fiscal.

“Even if real GDP grows by 9 per cent, we get practically nothing from agriculture. The rise in exports apart from contributing, drains more by way of drawback and so on... So what do we do…,” he said.

The Finance Minister, Mr Pranab Mukherjee, on Sunday raised the revenue targets for both direct and indirect taxes for the current fiscal. The Revenue Department has been asked to mop up Rs 7.82 lakh crore in 2010-11 against the Budget estimate level of Rs 7.45 lakh crore. While the direct tax collection target has been hiked by 4 per cent over the Budget estimate, the indirect tax collections target has been raised by 7 per cent. Indirect tax collections currently account for 40 per cent of the total tax receipts.

Meanwhile, Mr Mukherjee on Monday asked the Customs and Excise Department to gear up to face greater challenges such as introduction of goods and services tax (GST).

“GST is not only going to be the biggest tax reform we will introduce, it will make a major change in our constitutional set up for which efforts are being made to evolve a political consensus,” he said at the CBEC event.

He expressed confidence that a seamless transition would be achieved from the current arrangement to the accepted GST. “At the political level, we are working on it to evolve consensus in co-operation with the Empowered Committee of State Finance Ministers. I hope it will be possible to achieve success in bringing consensus though it may take sometime,” Mr Mukherjee said.

(This article was published in the Business Line print edition dated January 25, 2011)
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