Structural weakness

India needs to overhaul the tax system

Tax collection recovered swiftly towards the end of the last fiscal year with a pickup in economic activity. Gross tax collection grew 0.73 per cent in 2020-21, surpassing the revised estimate by Rs 1.24 trillion. Better than expected revenue collection also resulted in a lower than projected fiscal deficit. The Union government’s tax collection as a percentage of gross domestic product (GDP) improved to 10.25 per cent, compared to 9.88 per cent in the previous year. However, overall improvement in tax collection was largely on account of higher duty on petroleum products. Excise duty collection went up by over 60