In what comes as good news for the Indian Economy, the Direct tax collection has witnessed a rise by 13.6 percent to 7.43 lakh crore rupees in the period between April to December last year. As per the Central Board of Direct Taxes (CBDT) data, the refunds paid during April to December period is 17 percent higher compared to the previous year. The refunds worth 1.31 lakh crore rupees were given to taxpayers in the first three quarters of this year in comparison to 1.12 lakh crore rupees last year. The gross collection grew by 14.1 percent and advance tax collection registered a 14.5 percent growth to touch 3.64 trillion rupees.
The annual target for this year is 11.5 trillion rupees and collection so far is 64.7 percent of the budgeted target. In the last quarter, tax collection is relatively higher compared to other quarters and therefore the government is optimistic about touching the budgeted estimate. The measures taken in this direction include Income Declaration Scheme 2016, demonetization, and GST. “This year’s collection should be looked with that perspective. Despite the absence of special measures, the net collection has grown at above 13 per cent, which shows that budget target would be met,” said a government official.
Modi government has taken many steps to increase the tax collection since it stormed to power. This fiscal year, GST has been the driver behind the increase in tax. GST is being seen as the main driver of increased tax filings. Last month, finance minister wrote in a Facebook post, “The implementation of GST as a single consolidated tax has had a significant impact even on direct taxes. Those who have disclosed a business turnover for the GST now find it difficult not to disclose their net income for the purposes of income tax. Last year, the impact of GST on direct tax collection was not visible. Since GST had been imposed in the middle of the year, it will be more apparent this year.”
The government seeks to revisit the tax collection target and looks forward to a 1.5 percent increase in tax to GDP ratio. “Despite higher compliances in new system, as far as the non-oil taxes are concerned, we are still far from being a tax compliant society. Salaried employees are one category of tax compliant assesses”, said Jaitley, adding that most other sections will have to improve their track record. India has one of the lowest taxes to GDP ratio among the BRICS countries. According to the data given above, most of the developing countries have low ‘tax to GDP ratio’. For a developing nation to become a developed one, it requires to increase its citizens’ tax compliance. If tax to GDP ratio is low, a country finds it hard to provide basic amenities like health and education to its citizens. Universal access to these primary needs is required to build human capital and to improve the standard of living. India is planning to introduce Universal Health Care through the National Health Protection Scheme (popularly known as “Modicare”). The increased ‘tax to GDP ratio’ will allow more money to go directly into government coffers. This will provide enough resources to the government to make India a welfare state of the kind that Deen Dayal Upadhyay had dreamt of.