Fuel duty cuts to upset govts tax calculations

THE cut in Customs and excise duties to limit the rise in prices of petroleum products will have amajor 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 `2per litre. Petroleum Minister Jaipal Reddy said these measures would cost the government 49,000 crore in the current financial year. The figure included a hit of 26,000 crore from the Customs duty cut and 23,000 crore from the cut in excise duty on diesel. This means the loss on the Customs side for the remaining months (around nine) in 2011-12 is likely to be around 19,500 crore. The impact on excise duty collections will be 17,250 crore. The Budget had estimated 12.37 per cent growth in Customs revenue to 1,51,700. The collection in 2010-11 was 1,35,006. After the duty cut, the collection (taking the Budget estimate as the benchmark) is likely to be `1,32,200 crore (due to the estimated loss of 19,500 crore). This means a fall of 2 per cent from 2010-11. The 2010-11 Customs collections were 62.03 per cent higher than the 2009-10 figure of 83,324 crore. The excise duty cut means the Budget estimate of 1,64,116 crore is reduced by 17,250 crore to 1,46,866 crore. THIS implies that growth over the 2010-11 figure of 1,37,427 crore 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. The overall indirect tax collections, including service tax, are slated to fall from 3,97,816 crore to 3,61,066 crore. 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 areality. - www.business-standard.com