"Inflation can affect domestic demand and thereby adversely affect GDP growth... and consequently our tax collection", Revenue Secretary Sunil Mitra said while speaking at the annual conference of chief commissioners and directors general of income tax.
Mitra opposed any roll-back of customs or excise duty on petroleum products and said such an action could also impact indirect tax collection.
"Any roll-back of customs duty on crude oil or of excise duty on petroleum products on account of rising crude prices or on account of deregulation of diesel prices will significantly impact our indirect tax collection as well," Mitra said.
"Given these possibilities, I have serious apprehensions in respect of our tax revenue collection this year," he added.
Finance Minister Pranab Mukherjee, who was also present during the event, concurred with Mitra`s views.
"He (Mitra) has raised the issue rightly... situation is not conducive," he said.
Mitra, in his speech, also said that while the last fiscal has been a good year for tax revenue collection, the same may not be true in 2011-12.
"I would like to sound a note of caution in respect of targets for direct tax that has been set for this year at Rs 5.32 lakh crore," Mitra said.