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Economy
3 Apr 2016

Indirect tax collection surpasses Rs.7.04 lakh crores

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.

In context

Rising indirect tax collections

Indirect Taxes

What are indirect taxes?

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.

GST: a type of indirect tax

The Goods and Service Tax (GST), which is stated to be India's biggest indirect tax reform since independence, is a type of indirect tax which will subsume all other indirect taxes to simplify complexities in indirect taxation.

3 Apr 2016

Indirect tax collection surpasses Rs.7.04 lakh crores

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.

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Reasons for higher indirect tax collection

Reasons

Reasons for higher indirect tax collection

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.

Implications

Why is higher indirect tax collection helpful?

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.

Rs.7.8 lakh crores target set for FY2016-17

For the next fiscal year 2016-17, the finance minister has increased the indirect tax collection estimates by 10.8% over Rs.7.04 lakh crore to Rs.7.8 lakh crores.

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