CBDT Aims to Lift Tax-GDP Ratio to 15-20%

Current Affairs for UPSC IAS
Why this news is important?
  • Increase in net and gross collection numbers of Direct Taxes is a major indication of the strengthening of the Indian economy. This gives the clearest signal that the Indian economy has bounced back after two pandemic years
How it is important for the Civil Services Exam: 
  • Although equally important for all the stages of examination but in prelim a question on this aspect is more probable as it deals with basic fundamentals like , tax- GDP ratio as well as kinds of taxes ,i.e., is direct and indirect taxes and their share in the receipt of revenue.
Headlines in the Leading Newspapers: 
  • The Times of India -‘CBDT aims to lift tax-GDP ratio to 15-20% from the current 12%’
Relevance with syllabus of Civil Services Exam:
  • Prelims: Indian Economy
  • Mains: Indian Economy (paper-III)
What is the Theme?
  • India logs record net direct tax revenue in FY22.
Previous Years’ Questions 
Prelims: 
CSE 2015
A decrease in tax to GDP ratio of a country indicates which of the following? 
  1. Slowing economic growth rate 
  2. Less equitable distribution of national income 
Select the correct answer using the code given below. 
a) 1 only 
b) 2 only 
c) Both 1 and 2 
d) Neither 1 nor 2 
 
Question can be expected on: 
  • Taxes which come under direct and Indirect Taxes; what is the share of different taxes; the future aim of the government with respect to collection of taxes 
Q: Consider the following :
  1. The present share of Direct Tax is 52% of the total tax receipt.
  2. The direct tax collection this year has surpassed the indirect tax collection
Select the correct answer using the code given below. 
a) 1 only 
b) 2 only 
c) Both 1 and 2 
d) Neither 1 nor 2 
 
OR

Q: Consider the following :
  1. Corporation tax comes under indirect tax.
  2. India’s net direct tax collections is the highest collection ever.
Select the correct answer using the code given below. 
a) 1 only 
b) 2 only 
c) Both 1 and 2 
d) Neither 1 nor 2 
 
Gist of the NEWS: 
  • India logs record net direct tax revenue in FY22.
  • India’s net direct tax collections amounted to Rs. 14,09,640.83 crore for FY22, which is the highest collection ever.
  • It signals that the Indian economy has bounced back after two years of the pandemic. 
  • The collection in 2020-21 was only Rs. 9.45 lakh crore
  • In a single year, a growth of 49% has been witnessed.  
  • “The collection... is the best-ever... as far as income tax and corporation tax are concerned.”
  • Gross direct tax collections (before adjusting for refunds) grew 32.8% to Rs.16,34,454.95 crore in FY22 compared with Rs. 12,31,270.52 crore in FY21.
  • The direct tax-to-GDP ratio is around 12%.
  • The CBDT is working to raise the ratio to 15-20% in 5-10 years.
  • The direct tax collection this year has surpassed the indirect tax collection which was other way round till last year. 
  • The direct tax collection is now 52%. CBDT’s aim is to look at 60% of tax contribution coming from direct taxes in some years. 
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