Table of Contents
What has happened?
- India’s gross tax revenues (GTR) surged 34% in 2021-22 to exceed ₹27 lakh crore,
- Lifting the tax-to-GDP ratio to an at least 23-year high of 11.7% , from 10.3% in the previous year, Revenue Secretary Tarun Bajaj said on Friday.
- The tax collections were ₹5 lakh crore more than the Budget estimates for 2021-22, and even surpassed the revised estimates by ₹1.87 lakh crore, with direct taxes shooting up 49% and indirect taxes climbing by 20%.
- “When we started the year, the Budgeted estimate was ₹22.17 lakh crore, 17% higher than the previous year,” Mr. Bajaj said.
- In February, Nirmala Sitharaman, India’s finance minister had upwardly revised the tax receipts’ target to ₹25.16 lakh crore.
- “We are now close to ₹27.07 lakh crore, an increase of almost ₹5 lakh crore.
- These figures are tentative at the moment and they are likely to change and I hope that is on the upside, not the downside,” he added.
Direct tax
- The direct tax collections stood at ₹14.10 lakh crore in the reporting year, which is ₹3.02 lakh crore more than budget estimate.
- Corporation tax collections rose by 56.1% and personal income tax grew about 43%,
- Vaulting overall direct tax growth to 49%, which the Revenue Secretary said was the ‘highest in a long time’.
Indirect tax
- The indirect tax collection rose 30%.
- “The Customs duty collections went up by 48%, as reflected in our robust export-import data, while excise duty collections have actually contracted 0.2% and
- The Central GST, which was a challenge for us, has grown by almost 30%,” Mr. Bajaj said.
Tax to GDP ratio
- “Commentators have said India’s tax-to-GDP ratio is very low. It was 10.3% in 2020-21 and has gone up to 11.7%, the highest since at least 1999.
- Direct taxes are 6.1% of GDP, and indirect taxes are 5.6%. So the criticism we faced last year, that our indirect taxes are higher than direct taxes, has also been” addressed, he emphasised.
Tax buoyancy
- The Finance Ministry, in a statement, said the tax-GDP ratio was the ‘highest’ and the tax buoyancy ratio was ‘very healthy’ at 1.9.
- The tax buoyancy ratio, which measures growth in taxes relative to GDP growth, was 2.8 for direct taxes and 1 for indirect taxes in 2021-22.
Ratio of direct to indirect taxes
- The ratio of direct to indirect taxes recovered from 9 in 2020-21 to 1.1 in 2021-22.
Share with states
- ICRA chief economist Aditi Nayar said a large portion of the upside in revenues was shared with the States.
- “The actual tax devolution to the State governments in 2021-22 stood at ₹8.8 lakh crore, a considerable ₹1.4 lakh crore higher than the revised estimates (RE).
- After removing payments related to past arrears, the aggregate devolution to States has overshot the RE level by about ₹95,000 crore,” she noted.
reasons
- “This revenue growth has been propelled by rapid economic recovery after successive waves of COVID, Supported by one of the largest immunisation programmes of the world run by the Government,” the finance ministry said, Adding that the revenues signalled a ‘robust recovery’ and were supplemented by better compliance efforts.
What about this fiscal year FY23?
- Direct tax collection for the 2022-23 fiscal has been pegged at Rs 14.20 lakh crore.
- Indirect tax collection has been projected at Rs 13.30 lakh crore.
- Asked about the prospects of tax collection in the ongoing fiscal, the secretary said the figures have been provided in the Budget and
- It may not be possible to repeat such high growth rate in the current financial year.
Q) Under which of the following system of taxation, the tax rate diminishes as the taxable amount increases.
- Progressive Taxation
- Regressive Taxation
- Degressive Taxation
- Proportional Taxation
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