BS Number Wise: Tax mop up shines through fragile recovery

Direct-tax-to-GDP ratio in the first quarter of 2021-22 increased to 5.14 per cent, compared with 3.29 per cent over the last two years

A government’s tax collections depend on the state of the economy: that’s the pattern. When the coronavirus pandemic hit last year, India's economy shrank 7.3 per cent to pull down corporation and income-tax collections. Muted goods and services tax (GST) collections in the first half of the year forced the government to borrow and compensate states for their revenue shortfall.

That story changed from the second half of 2020-21, with tax collections becoming almost independent of economic performance.

Direct-tax-to-GDP ratio in the first quarter of 2021-22 increased to 5.14 per cent, compared with 3.29 per cent over the