goods and service tax

Tax Collection Trends in India: Service and Manufacturing Sector Insights

Introduction

This document addresses queries raised in the Lok Sabha regarding the tax collection trends from the Service and Manufacturing sectors in India. It provides insights into the factors contributing to tax collection increases and outlines the government's strategies for achieving a five trillion dollar economy.

Tax Collection Overview

Question: Higher Tax Collections Attributed to Service Sector Boom
Respondent: Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary

Tax Collection Comparison

  • Central Tax Collection for Financial Years:
    • 2020-21: ₹20,27,104 crore
    • 2021-22: ₹27,08,291 crore

Factors Influencing Tax Increase: The increase in tax collection can be mainly attributed to:

  • A swift economic recovery post-COVID-19.
  • Enhanced compliance owing to government measures.

Data on Sectoral Tax Collection

Service Sector and Manufacturing Sector Tax Collection:

  • GST Collection (2021-22):

    • Manufacturers: ₹4,88,215 crore
    • Service Providers: ₹4,38,921 crore
    • Note: Values derived from challan data based on payment date.

  • Direct Tax Collection (2021-22):

    • Manufacturers: ₹1,91,908.99 crore
    • Service Sector: ₹3,48,807.70 crore
    • Source: DGIT (Systems), CBDT based on information disclosed in Schedule ‘Nature of Business’.

Government Strategies for Economic Growth

To realize the goal of a five trillion dollar economy, the Government has implemented several key initiatives:

  1. Increased Capital Expenditure:

    • The capital expenditure (capex) budget was raised by approximately 35% in both the 2021-22 and 2022-23 fiscal years.
    • The overall budget allocation for capex in 2022-23, including allocations to States, is ₹10.68 lakh crore (4.1% of GDP).

  2. PM Gati Shakti Scheme:

    • This scheme enhances inter-ministerial coordination for infrastructure development, crucial for economic transformation.

  3. Production Linked Incentive (PLI) Scheme:

    • Originally a part of the Atmanirbhar Bharat Mission, this initiative has been broadened to include 14 sectors to amplify investment and economic growth.

  4. Financial Sector Strengthening:

    • Banks have been recapitalized, merged, and their balance sheets strengthened to facilitate increased lending.

  5. Reforms for Ease of Doing Business:

    • Significant reforms have been made, including the implementation of the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code (IBC), a reduction in Corporate Tax Rates, and the rationalization of Labour Laws.

Conclusion

The government’s multifaceted approach aims to enhance tax collection and boost economic growth, positioning India toward achieving a five trillion dollar economy through strategic investments, reforms, and increased compliance. These measures underscore the commitment to facilitating a favorable business environment and fostering sustainable economic development.