Spurt in indirect taxes indicates economic recovery: CEA
Reuters | Photo Credit: Arvind Subramanian

The Finance Ministry today 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 per cent 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 per cent over the year ago period.

The collection figures reflect in part the effect of the additional measures taken by the Central Government 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 per cent 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 that 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 per cent.

Customs collections was higher at Rs 29,986 crore, up 19.5 per cent. Service Tax mop up rose to Rs 27,607 crore, up 17.6 per cent annually.

Subramanian said the indirect tax revenue number is real money and based on real underlying economic activity.

The economy expanded by 7.5 per cent in the January- March quarter. The GDP expanded by 7.3 per cent in 2014-15 fiscal, up from 6.9 per cent last year.

For the current fiscal, the government expects economy to expand by 8-8.5 per cent.

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