Slowdown shows up in macro numbers

Excise Duty Collections Dip 8.7%, Customs Duties Down 0.9% In Oct

 MACRO indicators of the economy have started showing early signs of an industrial slump. Customs and excise collections for October 2008 have moved into negative territory for the first time in financial year 2008-09, declining by 5% from October 2007.
    While excise duty collections — a central tax levied on manufactured goods at the factory-gate level — dropped by 8.7%, customs duties — taxes levied on imported goods — fell by 0.9% in the month under review. However, service tax — a tax levied on services rendered —bucked the trend, growing at 18% in September.
    Excise collections have shown a declining trend since September 2008, when it fell by 3.8%. The dip in customs and excise collections indicates a slowdown in industrial activity and trade. While excise tax exemptions in some states and sectors have contributed to the fall, withdrawal of import duties on some of the bulk products like crude oil has also led to the decline. The central government had exempted certain states like Uttarakhand and Himachal Pradesh from excise levies in a bid to promote industrial activity. The government had removed customs duty on crude and reduced import duties on petroleum products like petrol and diesel to cushion fuel customers from the impact of spiralling crude oil prices globally.
    The total indirect tax collections — excluding service tax — stood at Rs 18,664 crore against Rs 19,646 crore in October 2007.
    In an early indication that India's manufacturing sector is slowing down, excise duty collections were down to Rs 9,399 crore in October 2008 compared with Rs 10,293 crore in October 2007. Faced with the global liquidity crunch and falling demand, India Inc has been cutting production to stay afloat.
    Sectors like steel and auto are among the major sectors which have seen a drop in demand. A finance ministry official said that sectors like cement, iron and steel had shown lower collections as per preliminary data.
    The fall in excise collections could impact the government's fiscal health. The finance ministry had targeted a collection of Rs 1,36,610 crore in excise duty in the current fiscal. Excise duty collections were required to grow by 9.3% to meet this target. Some sectors under watch
    THE fall in tax collections has sent out alarm bells for the government. Central Board of Excise and Customs (CBEC) has instructed its field officials to especially track sectors like sugar, cement, equipment which have witnessed a considerable slowdown in excise collections after a review meeting with finance minister P Chidambaram last week. Deterrent measures like the third-party information system have also been given emphasis to ensure that there is no evasion in tax payments. Revenue secretary has also called a meeting of the chief commissioners of income tax on Wednesday to discuss the state of collections on the direct tax front. Excise duty collections have witnessed a dismal performance for some time. But the growth in collections slipped in the negative for the first time in the current fiscal in September when it fell by 3.8%. The excise collections, in the first seven months of the current fiscal, stood at Rs 65,322 crore, recording a growth of just 0.6%.
    Customs collections also followed excise collections' footsteps. Customs collections witnessed a negative growth of 0.9% at Rs 9,265 crore compared with Rs 9,353 crore in October 2007. The buoyancy in service tax collections witnessed in the past few years appears to be declining too, indicating that the services sector could also be under pressure.