New Delhi: Tax revenues are slated to grow at a slower rate than India’s gross domestic product (GDP) this fiscal, reversing the trend of tax buoyancy over the past few years. The tax-GDP ratio is slated to drop from 11.5% in 2008-09 to 10.94% in 2009-10.
Meanwhile, as part of the shift in the country’s tax structure, direct taxes paid by individuals and companies continued to account for the majority of tax receipts in 2008-09 and the expectations are that this trend would be sustained in the current fiscal too.
The higher share of direct tax revenue which increased to 56% in 2008-09 from a low of 41% in 2003-04, reflects a “sharp improvement in the equity of our tax system.” Ahmed Raza Khan / Mint
The higher share of direct tax revenue which increased to 56% in 2008-09 from a low of 41% in 2003-04, reflects a “sharp improvement in the equity of our tax system,” Pranab Mukherjee said in his Budget speech.
While the share of direct tax in total tax collections was 53% in 2007-08, in the current fiscal, the same is budgeted to be close to 58%.
During 2008-09, collections of indirect taxes such as customs and Union excise duties that are paid by users of goods and services fell below their Budget estimates, only service tax exceeded estimates.
Among direct taxes, while collection of income tax and wealth tax were higher than targeted, corporation tax collections fell short of the Budget target.
The tax reforms introduced by the Centre—such as eliminating distortions in the tax structure, introducing moderate levels of taxation and expanding the base—have produced “impressive results”, Mukherjee said. The Centre’s tax-GDP ratio was 9.2% in 2003-04.
Mukherjee further said that while his direct tax proposals for the current fiscal was revenue neutral, the indirect taxes are estimated to yield a net gain of Rs2,000 crore for the full year.
During 2009-10, direct tax collections is expected to increase to Rs3.7 trillion compared with Rs3.45 trillion in 2008-09, whereas indirect tax collections is expected to fall to Rs2.71 trillion this fiscal against Rs2.83 trillion a year ago.
Among the major non-tax revenue sources, dividends and profits are expected to garner Rs49,750 crore, interest receipts Rs19,174 crore and other non-tax revenue will gross the highest amount of Rs70,601 crore in the current fiscal.
Non-tax revenue target includes a sum of Rs35,000 crore minimum expected revenue from auction of 3G spectrum. This is up from Rs20,000 crore estimated in the interim budget and also includes monies obtained from the auction of broadband wireless access spectrum.
Among other major sources of revenues, the government has accounted for Rs1,120 crore from disinvestment proceeds in the current fiscal.
Shauvik Ghosh contributed to this story.