The Hindu Business Line : Export orientation of manufacturing impacts excise duty collection

"At the current growth level and only four months to go, it will be difficult to meet the budgeted excise duty collection target of Rs 1,18,268 crore."

New Delhi , Dec. 27

WITH merchandise exports continuing to register double-digit growth in the current fiscal, the Finance Ministry is feeling the pinch of increased export orientation of the economy, especially that of the manufacturing sector.

The revenue department is of the view that increased export orientation of the manufacturing sector is having an adverse impact on its excise duty collection efforts.

Merchandise exports grew by about 16.01 per cent during April-November 2005 to touch $57.06 billion ($49.16 billion in the same period last year).

"When exports take place, we not only forego excise duty collection on such goods, the tax suffered on inputs that go into the manufactured export product has to be refunded by us. The manufacturing sector has increased its focus on exports. This has impacted domestic clearances and thereby the excise duty collections," a senior Finance Ministry official said.

The official also said that the aggressive projections on the demand growth in petro-products for the current fiscal could be another reason for the lower-than-expected growth in excise collections during the current fiscal.

The growth rate in domestic clearances of diesel, in particular, has taken a hit.

For the period April-November 2005, excise duty collections of the Centre increased by only 8.57 per cent to Rs 65,391.92 crore (Rs 60,229.19 crore)

The Government has, for the fiscal 2005-06, budgeted the excise duty collection at Rs 1,18,268 crore, which is about 19.90 per cent increase over the actuals for 2004-05.

"At the current growth level and only four months to go, it will be difficult to meet the budgeted collection targets for excise. But on the overall indirect tax front, the trend is satisfactory and we are on course to meet the budget estimates. Customs and service tax collections are buoyant," sources said.

Customs duty collections for the period April-November 2005 registered a 18.31 per cent increase to touch Rs 42,262.34 crore.

The Centre had pegged the customs duty collection target for 2004-05 at Rs 60,430 crore, which is a 4.98 per cent increase over the actuals for 2004-05.