INDIRECT TAX COLLECTIONS GROW 16.9% IN JANUARY

Tax collections grew at a healthy pace in January, indicating that the government is on track to achieve its budgeted tax collection, at least on the indirect tax front.

The pace of growth of excise and service tax collections, however, slowed in the month.

Indirect tax collections in January grew 16.9% compared to the year-ago period. While central excise grew 26.3%, service tax rose 9.4% and customs rose 10.1%.

For the 10 months ending January, indirect tax collections rose almost 24% to ₹7.03 lakh crore. This number was nearly 83% of the estimated indirect tax collection in the budget math of the government. While excise collection grew more than 40% to ₹3.13 lakh crore in the 10-month period, service tax collection grew 22% to ₹2.03 lakh crore and customs was up 4.7% to ₹1.86 lakh crore.

“From February 2017 onward, the favourable impact of the hikes in excise duty on fuels undertaken from November 2015 to January 2016 would fade away, which would result in further moderation in the growth of excise collections to a level that reflects industrial activity in the economy,” said Aditi Nayar, principal economist at rating agency ICRA Ltd.

“The service tax growth continues to benefit from the imposition of Krishi Kalyan cess. However, the pace of service tax growth has moderated in recent months, which may reflect a curtailment of discretionary spending.”

The government increased excise duty on petroleum products multiple times up to January 2016, as it looked to boost tax collection at a time when global oil prices were falling.

Direct taxes grew 10.79% to ₹5.82 lakh crore in the 10-month period ending January, accounting for 69% of budget estimates. The government may struggle to meet the tax collection targets of ₹8.47 lakh crore in the budget. While gross corporate income tax collections grew 11.7%, personal income tax was up 21%. However, after accounting for refunds that were up 41% amounting to ₹1.41 lakh crore, corporate collections grew 2.9%, while personal income tax grew 23%.

“The low growth of corporate income tax net of refunds remains a concern,” Nayar said.