As India steers itself on the growth path amid various challenges, Chief Economic Advisor V. Anantha Nageswaran said in the Economic Survey 2023 that the “substantial reforms” in India's taxation ecosystem post-2014 have removed the distortionary incentives from the economy. Tax revenue buoyancy has been sustained over the last two years, the survey said.
According to the survey, gross tax revenues have already reached 65 percent of the budgetary estimate at Rs 17.81 lakh crore during the first eight months of the current fiscal till November.
The survey said the growth in gross tax revenues mostly came from corporate and personal income tax collections. The survey also lauded reforms like GST, corporate tax cuts, exemption of sovereign wealth funds and pension funds from taxes, and removal of dividend distribution tax for reducing the tax burden on individuals and businesses. This has pushed the much-desired growth, giving confidence to the business community, it noted.
Tax reforms, such as corporate tax cuts, were followed by the pandemic-led uncertainty and disruptions. Their impact on collections is gradually becoming visible in higher tax collections, the survey said.
Direct taxes alone have registered a growth of 26 percent from April to November 2022, enabled by corporate and personal income tax growth. During April-November 2022, the government's gross tax revenue mop-up stood at Rs 17.81 lakh crore or 64.6 percent of the full-year target of Rs 27.58 lakh crore. Of this, direct tax collection is Rs 8.67 lakh crore and indirect tax collection is Rs 8.91 lakh crore.
Similarly, the Centre's goods and services tax (GST) collection till November 2022 was Rs 5.57 lakh crore. This was 71.5 percent of the full year budgetary estimate of Rs 7.80 lakh crore. The survey has highlighted that tax growth curve is rising after nosediving in the pandemic-hit FY21.
Revenue receipts registered robust growth in 2021-22 led by a rebound in the collection of all major direct and indirect taxes (except excise duties) in FY22. "Last year's revenue buoyancy momentum is continuing into the current year. The gross tax revenue registered a YoY growth of 15.5 percent from April to November 2022, and the net tax revenue to the Centre after the assignment to states grew by 7.9 per cent on a YoY basis," the survey said.
On the GST front, the survey noted that the average monthly gross GST collection has increased from Rs 90,000 crore in FY18 to Rs 1.49 lakh crore in FY23. Evidence suggests that the indirect tax system has improved in the post-GST regime.
Direct tax reforms that have led to revenue buoyancy, include the introduction of technology-backed tax governance reforms for simplifying tax processes, enhancing compliance and improving fraud detection systems.
Faceless assessment and appeal systems mean there is no need for a physical interface between taxpayers and the Income Tax Department. Data sharing between CBDT and CBIC on an automatic and regular basis is a promising reform, and it would result in efficiency gains in the tax system. These reforms augur well for future economic growth and future resource mobilisation in the economy.
