NEW DELHI: Indirect tax collection maintained its bumper pace in August, supporting the view that the economy can do better than the below expectation 7 per cent growth recorded in the first quarter of the current fiscal. Last month’s indirect tax collection rose 36.7 per cent from a year ago to Rs 54,396 crore, taking the overall figure for April-August to Rs 2.63 lakh crore.
“The GDP and indirect tax numbers seem to suggest that directionally the economy is recovering,” Chief Economic Advisor Arvind Subramanian told reporters after releasing the data on Wednesday. Indirect tax collections are considered a good measure of the underlying demand in the economy. India’s economy grew 7 per cent in the April-June quarter compared with 7.5 per cent in the previous quarter. The government has said the numbers should be revised up once the real indirect tax collections are foctored in.
A big part of the buoyancy is because of the additional resource measures such as increase in duty on petroleum products, increase in clean energy cess, withdrawal of exemptions for motor vehicles, capital goods and consumer durables, and the increase in service tax from 12.36 per cent to 14 per cent from June this year.
Customs duty collection has been helped by the 6 per cent depreciation in the rupee between April and August this year.
Stripping out these additional resource measures, the growth in indirect tax collections is a healthy 12.2 per cent in the April-August period and 11 per cent in August, the data released by the finance ministry said. The government has already raised over 33 per cent of the budgeted amount of Rs 6.46 lakh crore for fiscal FY16 and the growth is in excess of the targeted 18.8 per cent for the year. “So far, it seems like. Because the asking rate is 18.8 per cent, and we are doing 36.5 per cent, Subramanian said, when asked if indirect tax collection will cross the budget target. “These collections continue to suggest a healthy growth in the underlying tax base,” the ministry said in a statement.
“When tax collections are growing at over double digits, it suggests that the underlying tax base or the nominal GDP seems to be healthy and moving upwards,” Subramanian said.
