Direct tax-GDP ratio rises to 15-year high of 6.11% during FY23, shows data

The share of direct taxes in gross domestic product (GDP) rose to a 15-year high of 6.11 per cent during 2022-23 (FY23), but their buoyancy fell to 1.18 from 2.52 in the previous year, according to official data released on Tuesday.
 

This means that while the tax-to-GDP ratio registered a record high during FY23 since 2008-09, the economic growth at current prices could not result in as high a rise in direct tax collections during the year as witnessed during 2021-22 (FY22).

However, direct tax collections rose higher than economic growth during FY23. While nominal GDP rose 15.11 per cent during the year, direct tax collections rose 17.79 per cent, revealed data released by the Central Board of Direct Taxes.

A year earlier, nominal GDP grew by 19.51 per cent, but direct tax collections rose by 49.12 per cent. Thus, direct taxes grew at a rate which was 2.52 times the GDP growth rate in nominal terms.

Direct taxes rose by 160.52 per cent to Rs 16.64 trillion during the concluding year of the Narendra Modi government 2.0 (2022-23) over Rs 6.38 trillion during the last year of the Manmohan Singh government 2.0 (2013-14).

Direct tax buoyancy again falls sub-2% in 2022-23

On the other hand, gross direct tax collections registered an increase of more than 173 per cent at Rs 19.72 trillion during FY23 over Rs 7.22 trillion during 2013-14 (FY14).

Direct taxes contributed 54.62 per cent to the overall tax kitty during FY23 against 52.27 per cent in the previous year. However, this share was higher at 56.32 per cent during FY14. The decrease in contribution to direct tax collections in the overall tax kitty could be attributed to robust goods and services tax (GST) collections during FY'23. However, subdued excise duty collections came in the way of the indirect taxes’ share remaining less than half of the total tax kitty.

Central GST, the main segment of GST collections on Union government books, rose 21.53 per cent at Rs 7.18 trillion, while Union excise duty mop-up declined 18.37 per cent at Rs 3.19 trillion during FY23 year-on-year.

Corporation tax at Rs 8.26 trillion was slightly less than Rs 8.33 trillion from personal income tax during FY23.

The cost of collections of direct taxes declined to 0.51 per cent, the lowest since 2000-01, the data showed. This implies that the administrative machinery to collect direct taxes has become more efficient over the years.

Maharashtra contributed the highest at a little over Rs 6 trillion, representing 37.4 per cent of the overall direct tax kitty from states during FY23. If Union Territories’ collection of direct taxes is also added, the state’s share was 36.4 per cent of the overall direct tax receipts during the year.

As many as 77.8 million returns were filed during FY23, 6.5 per cent higher than 73 million in the previous year. As many as 6.4 more persons filed returns at a bit over 74 million during FY23 against 69.63 million in FY22.

The highest filers were in the individual category at Rs 89.1 million during FY23, almost 8 per cent higher than 82.5 million in the previous year.