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Fuel duty cuts to upset govt's tax calculations

Last updated on: June 27, 2011 08:33 IST

Fuel duty cuts to upset govt's tax calculations

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Santosh Tiwari in New Delhi

The cut in Customs and excise duties to limit the rise in prices of petroleum products will have a major impact on indirect tax collections for 2011-12.

On Friday, the government, while increasing prices of diesel, domestic LPG and kerosene, removed the 5 per cent Customs duty on crude oil, brought down the import duty on petrol and diesel from 7.5 per cent to 2.5 per cent and reduced the excise duty on diesel by Rs 2.60 to Rs 2 per litre.

Petroleum Minister Jaipal Reddy said these measures would cost the government Rs 49,000 crore (Rs 490 billion) in the current financial year.

The figure included a hit of Rs 26,000 crore (Rs 260 billion) from the Customs duty cut and Rs 23,000 crore (Rs 230 billion) from the cut in excise duty on diesel.

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This means the loss on the Customs side for the remaining months (around nine) in 2011-12 is likely to be around Rs 19,500 crore (Rs 195 billion). The impact on excise duty collections will be Rs 17,250 crore (Rs 172.5 billion).

The Budget had estimated 12.37 per cent growth in Customs revenue to Rs 151,700 crore (Rs 1,517 billion). The collection in 2010-11 was Rs 135,006 crore (Rs 1,350.06 billion).

After the duty cut, the collection (taking the Budget estimate as the benchmark) is likely to be Rs 132,200 crore (Rs 1,322 billion) (due to the estimated loss of Rs 19,500 crore). This means a fall of 2 per cent from 2010-11.

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Photographs: Reuters
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The 2010-11 Customs collections were 62.03 per cent higher than the 2009-10 figure of Rs 83,324 crore (Rs 833.24 billion).

The excise duty cut means the Budget estimate of Rs 164,116 crore (Rs 1,641.16 billion) is reduced by Rs 17,250 crore (Rs 172.5 billion) to Rs 146,866 crore (Rs 1,468.66 billion).

This implies that growth over the 2010-11 figure of Rs 137,427 crore ) Rs 1,374.27 billion) is likely to be 6.86 per cent. The Budget had projected 19.42 per cent growth.

Excise collections had grown 34.29 per cent in 2010-11.

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The overall indirect tax collections, including service tax, are slated to fall from Rs 397,816 crore (Rs 3,978.16 billion) to Rs 361,066 crore (Rs 3610.66 billion).

The projected growth rate of 16.04 per cent is expected to fall to 5.32 per cent.

The growth in 2010-11 was 40 per cent.

The growth in indirect tax collections may fall further if apprehensions over the slowdown in the economy become a reality.



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