According to the latest data released by the Union Finance Ministry, India’s tax-to-GDP ratio stood at 5.98 per cent in the last financial year (FY18), reports the Press Trust of India (PTI).

“There is a constant growth in direct tax-GDP ratio over last three years and the ratio of 5.98 per cent in Fiscal Year 2017-18 is the best DT-GDP ratio in last 10 years,” the government release noted.

Direct tax-to-GDP ratio denotes the contribution of direct taxes to the entire gross domestic product (GDP) of the country in a financial year. Larger the ratio, greater is the ability of the government to spend on developmental schemes.

The government acknowledged the positive impact of Demonetisation which compelled non-compliant citizens to pay taxes on their incomes. Also, various initiatives undertaken by different Law Enforcement agencies made it difficult to evade taxes.

“From two years prior to demonetisation, direct tax collections have increased 6.6 per cent and 9 per cent respectively. In the next two years, post demonetisation the increase by 14.6 per cent (part of the year before impact of demonetisation in 2016-17) and an increase of 18 per cent in the year 2017-18,” the release added.

Also, the average tax paid by corporates has increased by 55 per cent to Rs 49.95 lakh in 2016-17. It was Rs 32.28 lakh in 2013-14.

Also Read: India Must Not Chase A Mirage Called Tax-GDP Ratio. The Ratio Is Just Fine

GDP-Tax Ratio

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