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Service tax collection from city grows 26%
January, 21st 2009

In an indication that the services sector appears to have so far escaped relatively unscathed from the economic turmoil, service tax
collections from Mumbai, which contributes up to 30% of the total services tax revenues in the country, have clocked a 26% year-on-year growth at Rs 13,578 crore in the financial year to December 2008.

Service tax collections from Mumbai in the year-ago period was Rs 10,741 crore.

A highly-placed service tax official said that slowdown in collections from business process outsourcing (BPO) units and stock brokers had been compensated by increased collections from other services sector constituents such as insurance and communications.

He, however, warned that service tax collections could not continue to maintain growth momentum in the absence of a revival in industry growth.

"Rate of growth in services is interconnected with industrial growth. If industrial activity does not pick up in the coming quarters, service tax collections may not be able to experience incremental growth in perpetuity," the official said.

"There has already been a slowdown in collections from BPOs, the leading contributor from the software sector, and stock brokers, with orders dwindling for the former and fall in activity on the stock exchanges impacting tax collections from the latter."

Meanwhile, an excise department source in Mumbai told ET that net excise collections from Zone I, comprising part of Mumbai and part of Thane district up to Dahanu, have dipped by 7.48% to Rs 3,562 crore in the nine months of the current fiscal to December from the comparable period year ago.

For the month of December 2008, net excise revenue stood at Rs 350 crore against Rs 481 crore in the year ago period, corroborating a slowdown in industrial activity.

Zone II excise figures, which when totted up with Zone I collections, represent excise collections from Mumbai, were not available at the time of going to the press.

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