Tax GDP Ratio

Notes:

  • Direct taxes such as estate duty, gift tax have not been taken into account as they form negligible proportion of direct taxes;
  • Taxes on Union Territories also have been taken into account in the calculation.

The reduction in some of the tax rates notwithstanding, there has been a significant increase in revenue projections of the government, with tax revenues (i.e. gross central taxes) increasing by more than Rs.2,00,000 crore in 2017-18 (BE) when compared to 2016-17 (RE). Further, a large part of the projected growth in tax revenues is on account of direct taxes, with personal income tax accounting for the bulk of the growth in direct taxes.

As a result, not only is the Gross Central Tax to GDP ratio estimated to cross the 11 percent mark, the projected direct tax to GDP ratio (within central taxes) is also one of the highest in many years. However, the picture of progressivity in taxes can be misleading when we consider only Central Government tax receipts. In this context, it should be noted that when the overall tax collections of both the Centre and the States are taken into account, nearly two-third of total tax collected is accounted for by indirect taxes, implying that the tax structure in the country continues to be regressive.