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Indirect tax revenue receipts are the income that the government earns from taxes levied on goods and services rather than on income or profits. These taxes are collected by intermediaries (like manufacturers, retailers, or importers) and are ultimately paid by the consumers. Two significant components of indirect tax revenue in India are Excise Duties and Customs Duties. Excise Duty is a tax levied on the manufacture or production of goods within a country. In India, most excise duties have been subsumed under the Goods and Services Tax (GST) since 2017. However, excise duty is still levied on certain products like petroleum products, alcohol, and tobacco, which are outside the purview of GST. Customs Duty is a tax levied on goods imported into or exported out of a country. In India, customs duties are primarily focused on imports, with the goal of protecting domestic industries, regulating trade, and generating revenue for the government.
Excise Duties increased from 1,369 crore rupees in 1970-71 to 3,25,429 crore rupees in 2023-24, and Customs Duties grew from 524 crore rupees to 2,00,698 crore rupees over the last five decades, which represents growth rates of approximately 10.9% and 11.9% respectively, highlighting the expanding role of indirect taxes in India’s economy. The growth patterns of these two revenue sources have not been uniform, reflecting the dynamic nature of India’s economic policies and global economic conditions. Throughout the 1970s and early 1980s, both streams experienced steady growth, with Excise Duties typically surpassing Customs Duties. However, the 1990s marked a significant shift, coinciding with India’s economic liberalization policies. Customs Duties experienced rapid growth during this period, overtaking Excise Duties for several years. This shift likely reflects increased international trade following the opening up of the Indian economy. The 2000s and early 2010s saw continued growth in both revenue streams but with more pronounced fluctuations. Excise Duties regained dominance over Customs Duties in the mid-2000s, possibly indicating a renewed focus on domestic production and consumption. The global financial crisis of 2008 appears to have had a temporary impact, with both streams showing a dip around 2008-09, reflecting the broader economic slowdown. The most dramatic changes occurred in the latter half of the 2010s and early 2020s. Excise Duties showed explosive growth, particularly from 2015-16 onwards, reaching a peak of 3,80,508 crore rupees in 2021-22. This surge might be attributed to changes in the tax structure leading up to and following the Goods and Services Tax (GST) implementation in 2017. Customs Duties, while growing more slowly during this period, have shown a sharp uptick in recent years, reaching their highest point of 2,00,698 crore rupees in 2023-24.
It appears that these revenue streams were significantly impacted by the COVID-19 pandemic. Since 2019–20, both excise and customs duties have fluctuated significantly due to the economic disruptions brought on by the pandemic and the recovery efforts that followed. Despite these challenges, both revenue sources have demonstrated resilience, with strong growth in the most recent years. These trends in Excise and Customs Duties offer valuable insights into India’s changing economic structure and policy priorities. The overall growth in both streams indicates an expanding tax base and improved collection mechanisms. The shifting balance between the two reflects changes in India’s approach to domestic production and international trade. The recent dominance of Excise Duties suggests a growing emphasis on taxing domestic consumption, while the resurgence in Customs Duties may indicate evolving trade dynamics or policy shifts.
Looking forward, the strong recent growth in both revenue streams underscores their continued importance in India’s tax structure. However, policymakers may need to navigate challenges such as balancing revenue generation with economic growth objectives, managing the impact on domestic industries and international competitiveness, and adapting to changing global economic conditions. The trends also highlight the need for a flexible and responsive tax policy that can adapt to both domestic economic priorities and global economic shifts. In conclusion, the five-decade trajectory of India’s Excise and Customs Duties reflects a story of economic transformation, policy evolution, and fiscal adaptation. From the pre-liberalization era through economic reforms, global crises, and domestic policy shifts, these revenue streams have played a crucial role in India’s fiscal framework. Their future trends will likely continue to be shaped by a complex interplay of domestic policy choices, global economic conditions, and India’s evolving role in the international economic landscape.
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