India’s tax-to-GDP ratio to hit a record high of 11.7% of GDP in 2024-25: Revenue Secretary

• India's tax-to-GDP ratio is projected to reach 11.7% in 2024-25.

Relevance of the Rise in Ration

• This marks a historic high.
• This surge is attributed to an increase in direct taxes
• This aims for a fairer tax structure.

Efforts of the Government to raise the Tax Collection

• The government is making efforts to simplifying and rationalizing the tax regime to mitigate disputes, litigation, and intrusive enforcement methods.
• Direct taxes are anticipated to play a pivotal role in achieving this objective.
• Recent reductions in corporate and personal income taxes have been further given a flip to this effort. .

The New Tax Regime

• The introduction of a new tax regime has made significant changes
• It is offering a higher tax-free income threshold but without deductions.
• It is expected to attract a significant portion of income taxpayers.
• Personal income tax collections have witnessed substantial growth, albeit with a projected moderation by year-end.

Prospects for GST Rationalization

• A Group of Ministers (GoM) tasked with reviewing the GST rate structure has been reconstituted.
• Continuous adjustments to rationalize rates on various items remain a priority for the GST Council.

Expectations for Future

• Revenue growth projections for 2024-25 are modest, with a buoyancy rate expected to decline slightly.
• Tax revenues are forecasted to grow at a rate slightly higher than the nominal GDP growth of 10.5%.

Corporate Tax Regime

• The deadline for new manufacturing units to benefit from a reduced corporate tax rate is approaching,
  • With many companies having already availed this benefit.
• A significant portion of corporate tax income is being filed at the reduced rate of 22%, indicating uptake since its introduction in 2019.

Prelims Takeaway

• Tax-to-GDP Ratio
• Corporate Taxation in India