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Excise collection jumps 12% in April as greenshoots appear

Experts see growing appetite for manufactured goods, positive tax reforms for compliance as also the reasons

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Positive measures taken to improve tax compliance and appearance of greenshoots in the economy has helped government to up its indirect tax collection.

Central excise revenue– excluding cess administered by other departments – jumped a whopping 112% to Rs 18,373 crore last month from Rs 8,655 crore in the same month last year.

Amit Kumar Sarkar, partner, Grant Thornton India LLP, said the growth in central excise collection for the last month was abnormally high and could be attributed to the building confidence amongst consumers to buy manufactured goods.

"It has been observed that the demand for manufactured products in some sectors has shot up over the 3-6 months. April was one of the best months for automobile sales, whose impact could have trickled down to its ancillary sectors tyre, steel and others. There has been a general uptick in the economic growth," he said.

Sarkar said a dissection of the economic growth showed that it was not just led by exports but the domestic consumption was also looking up. And this, he said, augured well for excise collection.

However, the swell in total indirect tax revenue in April this year, which climbed 46.2% to Rs 47,747 crore from Rs 32,661 crore last year, did not have to do with just economic factors, but some foresighted steps taken by the government to improve compliance could also be responsible for it.

"There could have been reduction in disputed liabilities because of reduction in the penalty. This must have encouraged tax payers to shed baggage and pay up instead of going for litigation. One of major reasons could be the retrospective reform in indirect tax, which is in favour of the industry. This could have improved compliance," said Sarkar.

During the same month, the year-on-year (YoY) service tax collection rose 21.2% to Rs 15,088 crore from Rs 12,451 crore.

Sarkar pointed to prohibitive cost of delay that could have led to improved service tax revenues. Interest on late payment of service tax, which was earlier 18% has been hiked to 30% to encourage early clearance of the levy.
The same period has seen customs collections go up 23.6% to Rs 14,286 crore from Rs 11,555 crore.

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