India’s gross tax revenue surged 34% to over 27 lakhcrore in 2021-22, lifting the tax-to-GDP ratio from 10.3% the previous year to an at least 23-year high of 11.7%, Finance Minister Tarun Bajaj said on Friday.
Tax revenue was £5m higher than budget estimates for 2021-22 and even topped revised estimates by £1.87m, with direct taxes up 49% and indirect taxes up 20%.
“When we started the year, the budgeted estimate was 22.17 lakh crore, 17% higher than last year,” Mr Bajaj said. “We are now close to 27.07 lakh crore, up almost 5 lakh crore. These numbers are preliminary at the moment and are likely to change and I hope this is on the positive side and not on the negative side,” he added.
Corporate tax revenue rose 56.1% and personal income tax rose about 43%, outpacing overall direct tax growth to 49%, which the finance minister said was the “highest in a long time”.
“Tariff collections are up 48%, reflected in our robust export-import data, while excise collections are actually down 0.2% and central GST, which has been a challenge for us, is up nearly 30% ‘ Mr Bajaj said.
“Commentators have said India’s tax-to-GDP ratio is very low. It was 10.3% in 2020-21 and has risen to 11.7%, the highest since at least 1999. Direct taxes are 6.1% of GDP and indirect taxes are 5.6%. This also takes up the criticism from last year that our indirect taxes are higher than direct taxes,” he emphasized.
The Treasury said in a statement the tax-to-GDP ratio was the “highest” and the tax lift ratio was “very healthy” at 1.9. The tax lift ratio, which measures the growth in taxes relative to GDP growth, was 2.8 for direct taxes and 1.1 for indirect taxes in 2021-22. The ratio of direct to indirect taxes recovered from 0.9 in 2020-21 to 1.1 in 2021-22.
“This revenue growth was driven by the rapid economic recovery from successive waves of COVID, aided by one of the largest government-run immunization programs in the world,” the Treasury Department said, adding that the revenue signaled a “robust recovery” and were complemented by better compliance efforts.
ICRA chief economist Aditi Nayar said much of the yield benefit will be shared with states. “The actual tax transfer to state governments in 2021-22 was £8.8 billion, which is a substantial £1.4 billion over the revised estimates (RE). After removing payments related to past arrears, the aggregate transfer to states exceeded the RE level by approximately 95,000 crore,” she noted.
