Spurt in indirect taxes indicates economic recovery: CEA Arvind Subramanian

NEW DELHI:The finance ministry on Thursday said the spurt in indirect tax collections this fiscal was an indication of economic recovery though there was some need for caution as these were only early indications.

“If you look at 12.6% increase in April-May indirect tax revenues... The revenue growth is healthy, and all things taken into effect, it should reflect a kind of underlying recovery in economy,” Chief Economic Advisor Arvind Subramanian told reporters here. Indirect tax collections during the first two months (April-May) of the current financial year increased to Rs 96,128 crore, up 39.2% over the year ago period. The collection figures reflect in part the effect of the additional measures taken by the Centre, including increase in excise duty on diesel and petrol, hike in clean energy cess, and withdrawal of exemptions for motor vehicles and consumer durables.

After taking-out the impact of these additional measures, indirect tax collections have shown an increase of 12.6% for the two-month period April-May 2015. Subramanian, however, cautioned saying one should be careful and appropriately cautious because these are only the collection figures of two months. “To some extent these numbers are going to be high because of base effect, corresponding collections last year were somewhat down. That too is a caveat (which) needs to be noted,” he said, adding the effect of a higher base could kick in about June-July. Subramanian said the figures reflect that there is momentum and economy is picking up. “What it says about underlying nominal GDP growth is encouraging.” During the two-month period, central excise collections increased to Rs 38,535 crore, an increase of 88%.

Customs collections was higher at Rs 29,986 crore, up 19.5%. Service Tax mop up rose to Rs 27,607 crore, up 17.6% annually. Subramanian said the indirect tax revenue number is real money and based on real underlying economic activity. The economy expanded by 7.5% in the January- March quarter.