Despite a windfall tax on crude production and imposition of export taxes on fuel, the Centre’s excise duty mop up contracted by 26% in July.
Customs duty collections also declined by 12% in July amid suspension of duty on cotton and concessional duty on edible oil. The decline comes despite the fact that merchandise imports are at a record high level of over $60bn for the past four months.
While direct tax collections have grown by a stellar 42%, indirect tax mop up grew by 10% during the April-July period, dragged down by the contraction in customs duty and excise collection compared to the corresponding period last year.
This may lower the government’s ability to spend and boost economic growth amid persistent global economic uncertainty and a tightening monetary policy environment, which may affect private sector capital expenditure going forward. The first quarter gross domestic product growth came in at a lower-than-expected 13.5%.
Excise duty collection for July stood at ₹23,919 crore, compared to ₹30,402 crore in the previous month, and ₹32,480 crore in the corresponding month last year.
Incidentally, this was first month of additional taxes on the fuel sector. On 1 July, the Centre imposed an export duty of ₹6 per litre on petrol and air turbine fuel and ₹13 a litre on diesel. Additionally, a windfall tax of ₹23,250 per tonne was imposed on the sale of domestic crude. These were reviewed on 20 July, when the ₹6 per litre duty on petrol exports was scrapped and the tax on the export of diesel and jet fuel was cut to ₹11 and ₹4 respectively.
