Major excise duty cut on petrol, diesel not likely soon

Officials say that the trend will continue this year too, with no major relief in tariffs or any major increase in capital expenditure.
Image used for representational purpose.
Image used for representational purpose.

NEW DELHI: Don't expect any respite in the form of excise duty cuts on petrol and diesel anytime soon as the government continues to struggle with its finances. If the 2020-21 tax collection figures are anything to go by, this year (2021-22) will continue to see the government depending on high excise and customs duty collections to tide over a tight fiscal situation. 

In 2020-21, even though income tax and corporate tax collections remained muted, high indirect taxes and muted capital expenditure helped the government contain the fiscal deficit to lower than 9.5 per cent. Officials say that the trend will continue this year too, with no major relief in tariffs or any major increase in capital expenditure.

"We do not expect cuts in customs and excise duty, at least for the first half of this fiscal year. So, there is less headroom for reduction on taxes on petroleum products. Also, I do not see any major slashing or reduction in GST slabs, at least this year," a senior finance ministry official said.

The Gross Tax Revenue (GTR) collection of the Union government was Rs 20.24 lakh crore in 2020-21, slightly higher than Rs 20.1 lakh crore collected in 2019-20, despite the lockdown.

A close analysis shows that while corporate tax collections saw a steep decline during the year, followed by income tax, it was cutting down on subsidies, better GST collections in the second half, and heavy taxation on petroleum products which kept the numbers up. 

The government mopped up Rs 3.9 lakh crore in excise duties in 2020-21, a 62.5 per cent jump over the Rs 2.4 lakh crore collected in the previous year. Similarly, customs duty collections soared 23 per cent to Rs 1.35 lakh crore in 2020-21.

The government's fiscal deficit, meanwhile, settled at Rs 18.2 lakh crore, or 98.5 per cent of its revised estimate of Rs 18.49 lakh crore. The country’s revenue deficit settled at Rs 14.54 lakh crore, or 99.8 per cent of the government’s revised estimate.

This was mainly due to the 5.9 per cent higher net tax revenue collection and 23.9 per cent higher collections under the non-debt capital receipts head. Revenue expenditure for the year stood 2.5 per cent higher than the revised estimates. However, capital expenditure was 3.1 per cent lower than revised estimates. 

For the current fiscal year 2021-22, the target is to contain fiscal deficit at 6.8 per cent. While the high dividend received from the RBI will help offset some of the shortfall in divestment proceeds, officers claim that there is less room for any indirect tax relief.

"The second wave makes it difficult for any relief on indirect taxation. Only better revenue collection and some boost in corporate tax can improve the numbers," an official said. 

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