Indirect tax collection surpasses Rs.7.04 lakh crores

Indirect taxes are taxes collected by the government from intermediaries such as manufacturers and retailers, but the eventual burden falls on the consumers who consume goods and services.

Examples of indirect taxes in India include sales tax, VAT, excise duties, etc.

Unlike direct tax (such as income tax, wealth tax, etc.) which is levied on individuals, indirect tax is levied on goods and services.

According to Najib Shah, Chairman Central Board of Excise and Customs, the total indirect tax collection has surpassed even the revised estimate of Rs.7.04 lakh crores.

The finance minister during budget 2015-16 had kept a target of Rs.6.48 lakh crores for indirect taxes in FY2015-16.

The target was revised by the finance minister in Feb'2016 to Rs.7.04 lakh crores owing to better collections.

The increase in the excise duty on petroleum products is the single major reason for greater collection of excise duties, which forms a major part of indirect taxes.

The government had not passed the entire benefit of decline in crude oil prices to the consumers but increased excise duties.

Consequently, the FY2015-16 excise duties collection was revised from Rs.2.3 to Rs.2.84 lakh crore.

Greater taxes increase government's income allowing it to spend more on developmental causes.

A greater indirect tax collection will help in making up for the subdued direct tax collection for the financial year 2015-16.

Further, it provides additional cushion to the finance minister to adhere to its fiscal deficit (total expenditure less total income) target of 3.9% for the financial year 2015-16.