GST at par with personal income tax as share of GDP
“GST has become the largest contributor to indirect taxes, ever since its implementation in FY 2017-18,“ a Finance Ministry report prepared to meet the obligations of the Government under the Fiscal Responsibility and Budget Management Act, 2003, said. It showed that the share of GST in GDP went up to 3.1 per cent in FY23 from 2.8 per cent in FY21, During the same period share of personal income tax rose from 2.5 to 3.1 per cent of GDP Apart from GST, indirect taxes also include Custom Duty and Central Excise Duty (levied mainly on petrol and diesel). At the same time, direct taxes comprise corporate income tax (CIT) and personal income tax (PIT).
While direct taxes are considered progressive as people’s tax incidence rises with a rise in income, indirect taxes are called regressive as these are levied according to the category of goods (merit vs demerit) or value of goods and not the basis of income of the consumer. According to a budget document, the Direct and Indirect Tax receipts are individually estimated to grow at 10.5 per cent and 10.4 per cent, respectively. The overall tax (GTR) buoyancy is estimated at 0.99. As the tax collection from GST stabilises, it is likely to give a boost to the Indirect tax collection with an estimated GST buoyancy of 1.14 in the ensuing year. In BE 2023-24, it is estimated that the direct and indirect taxes contribute 54.4 per cent and 45.6 per cent, respectively, to Gross Tax Revenue (GTR).
