tax collections in india – a primer

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Tax Collections in India – A primer

Sector: Macroeconomics

Oct-2017

Context

• Increase in tax collections primarily by reducing evasion is one key focus area of the current NDA government, and its PM Mr Narendra Modi and FM Arun Jaitley. If this get this right, it will indeed be transformative for the Indian economy.

• Considerable public discussion has occurred on whether the twin initiatives – demonetisation and GST implementation – are mere disruptors or are having any real beneficial impact

• IBR was also intrigued by these questions. We realise it is still early days for any results to show up. However, we went about first compiling some historical data for our own understanding. We intend to follow this theme over next few quarters to see where this is going

• This data dump is uploaded for public benefit. We hope to make this more robust going forward

www.indiabusinessreports.com 2Tax Collections in India

India’s Tax/GDP ratio is less than most advanced economies

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Source: India Business Reports, Wikipedia, RBI, World Bank

www.indiabusinessreports.com Tax Collections in India

39.3

28.1

35.9

44.5

34.4

47.9

19.4

43.5

34.4

39.8

33.6

19.5

37.334.3

23.7

12.0

24.9

39.8

35.0

5.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

Tax/GDP Ratio (%) - Top 20 economies

• The government wants to raise it by enforcing better tax compliance; reducing rampant evasion of both direct and indirect taxes

Tax/GDP has shown a rising trend, up sharply from the low of 2009-10

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Source: India Business Reports, RBI

www.indiabusinessreports.com

15.6%16.0%

15.6%

14.4%14.6% 14.7% 14.6%

14.2%

13.3%

15.3%

15.8%

14.9%

15.7%

16.2%

17.1%

16.1%

17.5%17.7%

16.6%

15.2%

16.0%

17.7%

18.2%

17.8%17.6%

18.9%

19.4%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

Tax/GDP ratio (%)

Tax Collections in India

• You will often see a lower ratio of 10-11% quoted in media. That is not quite correct. Since it perhaps takes only central government taxes in the numerator. To be fair, even World Bank data on Tax/GDP for India has the same issue

~Rs 26.5 trillion (USD 385B) of taxes were collected in 2016-17

www.indiabusinessreports.com 5

876 1,146 1,463 1,973 2,300 3,010 3,520 4,854

7,240

9,263

12,501

16,880

20,207

23,553

26,495

-

5,000

10,000

15,000

20,000

25,000

30,000

Total Tax Collection (Rs B)



• This is Centre + States

Central government collects around 2/3rd of taxes


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Tax Collection Mix - Centre versus State

Centre State



Share of direct tax has risen from 16% in ‘91 to 37% in ‘17


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Direct versus Indirect Tax

Direct Indirect



Direct Tax Assessees


• Around 5.2 crore or 52 million assesses file returns, of which individuals and are around 49million according to latest available data. (Several tax filers would not be paying any tax however).

• According to a recent government statement, 6.35m individual tax payers were added in FY16, and another 8.07m were added in FY17. Also, a total of 9.1m taxpayers were added in FY17.

• Caveat: Government’s tax assesee data appears to be a little dodgy. Different sources keep showing varations

Source: Income Tax Department

AY 2013-14

Association of Person 1,38,098 Body of Individuals 6,052

Company 7,02,621 Firm 10,38,309

Governmen 159 Hindu Undivided Family 9,56,233 Artificial Juridical Person 10,039

Local Authority 5,935 Individual 490,33,288

Trust 2,02,590 TOTAL 520,93,324


Indirect tax collections


• Please note, this is only date for collection by Central government, which is around 2/3rds of total indirect tax collection. As we noted earlier, states collect indirect taxes as well

Year

Revenue %age Share in TotalRealization from Indirect Taxes

Customs Excise Service FTT/Total

Customs Excise Service

Duties Duties Tax IATT Duties Duties Tax2000-01 47,542 68,526 2,613 1,133 1,19,814 40 57 2 2001-02 40,268 72,555 3,302 1,193 1,17,318 34 62 3 2002-03 44,852 82,310 4,122 1,324 1,32,608 34 62 3 2003-04 48,629 90,774 7,891 1,314 1,48,608 33 61 5 2004-05 57,611 99,125 14,200 - 1,70,936 34 58 8 2005-06 65,067 1,11,226 23,055 - 1,99,348 33 56 12 2006-07 86,304 1,17,088 37,484 - 2,40,876 36 49 16 2007-08 1,04,119 1,23,611 51,301 - 2,79,031 37 44 18 2008-09 99,879 1,08,613 60,941 - 2,69,433 37 40 23 2009-10 83,324 1,03,621 58,422 - 2,45,367 34 42 24 2010-11 1,35,813 1,38,299 71,016 - 3,45,128 39 40 21 2011-12 1,49,300 1,45,617 97,356 - 3,92,273 38 37 25 2012-13 1,65,818 1,75,873 1,32,518 - 4,74,209 35 37 28 2013-14 1,69,469 1,70,197 1,54,778 - 4,96,238 34 34 31 2014-15 1,88,016 1,89,953 1,67,969 - 5,45,938 34 35 31 2015-16 2,10,000 2,86,000 2,11,396 - 7,07,377 30 40 30 2016-17#(P) 2,26,000 3,83,000 2,54,000 - 8,63,000 26 44 29

Abbr. : IATT : Inland Air Travel Tax; FTT : Foreign Travel Tax. : FTT/IATT abolished since 09.01.2004.Note : # : from CBEC press release

Source : Ministry of Statistics and Programme Implementation, Govt. of India & Past Issues. (ON1196), Lok Sabha Unstarred Question No. 437, dated on 03.02.2017

(Rs. in Crore)


Customs and excise revenue from petroleum products


Petroleum Product Petrol Diesel Sub total Annual Total

2012-13Customs 492 211 703 46,926

Central Excise 23,710 22,513 46,223

2013-14Customs 626 26 652 50,222

Central Excise 22,424 27,146 49,570

2014-15Customs 901 75 976 74,266

Central Excise 30,826 42,464 73,290

2015-2016 Central Excise 53,413 1,01,177 1,54,590 1,54,590

2016-2017* Central Excise 64,509 1,37,426 2,01,935 2,01,935

Rs crore

• Government has reaped large increase in revenues imposing additional duties and by keeping consumer prices high at a time of low international crude prices

Source : Lok Sabha Unstarred Question No. 1930, dated on 31.07.2015 & Lok Sabha Unstarred Question No. 4955, dated on 31.03.2017.


Collection from various cesses


2014-15 2015-16 2016-17 2017-18(B)

Education Cess 35,977 27,785 29,599 31,654

Krishi Kalyan Cess 9,000 10,800

Swachh Bharat Cess - 3,926 12,500 13,300

Security Transaction Tax 7,398 7,350 7,398 7,768

Clean Environment Cess 5,393 12,676 28,500 29,700

• In recent years, the government is introduced various addon taxes – to income tax / customs / excise and service tax. These are meant to be spent in specific areas like education / farming etc

• Collections from some of these have become quite substantial

Rs crore

Source : Budget documents


Government statements on impact of demo and GST on direct taxes

• 07-August: 2017- 25% growth in number of Income Tax Returns filed in current fiscal Advance Tax (Personal Income Tax) collections up by 41%

– As a result of demonetization and Operation Clean Money, there is a substantial increase in the number of Income Tax Returns(ITRs) filed. The number of Returns filed as on 05.08.2017 stands at 2,82,92,955 as against 2,26,97,843 filed during the corresponding period of F.Y. 2016-2017, registering an increase of 24.7% compared to growth rate of 9.9% in the previous year. The growth in returns filed by Individuals is 25.3% with 2,79,39,083 returns having been received upto 05.08.2017 as against 2,22,92,864 returns in the corresponding period of F.Y. 2016-2017.

• 31-August-2017: OPERATION CLEAN MONEY– The Income Tax Department launched ‘Operation Clean Money’(OCM) on 31st January, 2017 to analyse the data of the persons who deposited large

sums of cash and whose returns of income were not in sync with such deposits.

Phase 1

• In the first phase of OCM, 18 lakh suspect cases were identified through use of data analytics where cash transactions did not appear to be in line with the tax profile of depositors.

• The scale of the Operation may be gauged from the fact that response of 9.72 lakh persons in respect of 13.33 lakh accounts involving cash deposits of around Rs.2.89 lakh crore, as per pre-defined parameters on sources of the cash deposits was captured by the Income Tax Department within a short span of 3-4 weeks.

Phase 2

• The Operation Clean money has since moved into the next phase that includes enforcement actions in high risk cases, taxpayer engagement through a dedicated website in medium risk cases and close monitoring in low risk cases.

• The exercise has also unearthed large number of persons and clusters having suspect transactions. These include about 14,000 properties of more than Rs.1 crore each where persons have not even filed Income Tax Returns. The investigations are in progress.


Government statements GST

• 29-August-2017: The number of new taxpayers who have registered with the GSTN upto 29th

August, 2017 (10 a.m.) is 18.83 lakhs (1.88m)– Total GST registered based was 72.33 lakh taxpayers as on the same data. In other words, there was an increase of 35% in the registered

base


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tax collections in india – a primer

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