Tax collection in December up after cash swap: Arun Jaitley

New Delhi: Union finance minister Arun Jaitley on Monday flaunted double-digit growth in indirect tax collection in December to claim that Prime Minister’s Narendra Modi’s move to demonetise the Rs 500 and Rs 1,000 notes had little impact on economic activity.

However, former Prime Minister Manmohan Singh debunked the government’s claims and said that demonetisation would have a “very significant adverse effect” on the country’s GDP and will be an issue in the coming Assembly elections in five states.

Mr Jaitley said at a press conference that indirect tax receipts grew by an annual 14.2 per cent in December, helped by a surge in excise, reflecting an uptick in manufacturing. In December that saw a cash crunch and long lines outside bank branches and ATMs  following the demonetisation, also saw Central excise collections grow at 31.6 per cent (a reflection on manufacturing activity), while service tax was up by 12.4 per cent. The Customs mop-up, however, saw a 6.3 per cent decline, which Mr Jaitley said was mainly due to a dip in gold imports.

After demonetisation, many experts had warned of job losses and a slowdown in economic activity. The finance minister dismissed these concerns as unfounded, and said: “All stories about job losses or businesses suffering losses  are  anecdotal.

The growth figure does not depend on anecdotal basis... The statistics and taxation figures are real. This is the money which has come in. This data is real.”

Mr Jaitley said when compared with tax collections in November, indirect tax receipts in December were up by 12.8 per cent. “Since there has been a considerable debate in the public space on the impact of the currency squeeze in November and December, the data of these two months becomes relevant,” the finance minister said.

Tax collections in December 2016 have also moved up compared to December 2015 and November 2016.

Former Prime Minister Manmohan Singh, meanwhile, releasing the Congress Party’s manifesto for the Punjab polls, said demonetisation will have a “very significant adverse effect” on the country’s GDP. “You will see there will be a very significant adverse effect on the country’s GDP,” Dr Singh said. Recalling his statement in Parliament that demonetisation would have a very adverse impact on the country’s GDP, Dr Singh said subsequent developments had proved him right.

Ratings agency Moody’s Indian subsidiary ICRA said that there was a slowdown in indirect tax collections in December. “In terms of indirect taxes, the growth for the month of December 2016 inclusive of additional resource mobilisation measures has come down sharply to 14.2 per cent from 23.1 per cent for the month of November 2016 and the cumulative 26.7 per cent in April-October 2016,” said Aditi Nayar, principal economist of ICRA Ltd.

She said  while this “slowdown in growth of indirect taxes in the month of December 2016” is partly on account of a waning of the favourable base effect related to the earlier hike of excise duty on fuels and low gold imports, “it may also reflect the impact of the note ban on factory production and consumption in certain sectors”.

“The pace of growth of service tax collections has slipped to 12 per cent in December 2016, from the cumulative growth of 26 per cent at end-November 2016, which may be because of a cutback on discretionary spends. The double-digit growth of service tax benefits from the imposition of Krishi Kalyan Cess from June 1, 2016 onwards,” she added.