Notwithstanding the sharp contraction in growth of indirect tax collections during the first four months of 2009-10, Finance Minister Pranab Mukherjee on Tuesday exuded confidence that the mop-up target set for the year would be met.
The government has targeted a revenue collection of about Rs. 2.70 lakh core through indirect taxes during the current fiscal. “I am hoping so,” Mr. Mukherjee said when asked whether the indirect tax collection target would be met despite the significant drop in revenue mop-up in the wake of the slowdown.
Briefing the media after inaugurating the annual conference of directors general and chief commissioners of customs, Central excise and service tax organised by the Central Board of Excise and Customs (CBEC) here, Mr. Mukherjee said he expected an improvement in indirect tax collections from the third quarter onwards, despite the 28 per cent decline in the first four months.
The negative growth in mop-up of indirect taxes during the first four months, Mr. Mukherjee said, was “a matter of worry” although it was a reflection of the economic slowdown followed by the consequent stimulus measures, such as reduction in excise duty and service tax.
“I am hoping that the trend that we have noticed in the first quarter [would end by the next quarter] ... so I am expecting improvement from the third quarter. No doubt, this trend [of declining indirect tax collections] reflects the overall slowdown of the economy and the effect of stimulus measures,” Mr. Mukherjee said.
However, despite the fall in revenue coupled with the high fiscal deficit, the Finance Minister maintained that it was not time yet to withdraw the stimulus measures which were injected to combat the economic slowdown. “When the decision is made [on exit strategy] it will be known to you…We have reviewed the situation. Nationally, internationally the situation is reviewed. G-20 Finance Ministers reviewed the overall situation. The consensus is that the world economy is still not out of the woods. It will not be desirable to work out the strategy for exit at this moment,” Mr. Mukherjee said.
On the issue of the Goods and Services Tax (GST), proposed to be introduced from April 1, 2010, Mr. Mukherjee said: “Talks are going on. We have identified certain areas where there is convergence and certain areas where there is likely to be convergence.” In this regard, the Empowered Committee of State Finance Ministers is meeting on September 16, he said.
Earlier, inaugurating the conference, Mr. Mukherjee noted that despite a “gradual thaw in the winter of economic crisis” and the early green shoots of economic recovery, the situation was still far from normal.
The country’s major traditional export markets in the developed economies had contracted in the last 10 months and to combat the downturn, the Government announced a slew of measures, including reduction in indirect taxes, to put more money into the hands of consumers.
Projecting the current economic environment, Mr. Mukherjee said: “The deficient monsoon has raised a spectre of drought in large parts of India. The government has to be prepared to take all ameliorative measures which will also have significant financial implications. The fiscal deficit is presently on the higher side and the Government is determined to revert to the path of fiscal consolidation at the earliest.”