India’s tax-to-GDP ratio rises third year in a row

Current Context: India’s tax-to-GDP ratio has risen for the third year in a row, reaching 11.7% in 2021-22. This is the highest tax-GDP ratio in at least 23 years. The growth in tax revenues was driven by a robust economic recovery after the COVID-19 pandemic, as well as better compliance efforts by the tax administration using technology and artificial intelligence.

• The direct tax-to-GDP ratio increased from 5.1% in 2020-21 to 6.1% in 2021-22, while the indirect tax-to-GDP ratio rose from 5.2% to 5.6%.
• Within direct taxes, the personal income tax-to-GDP ratio went up from 2.11% in 2014-15 to 2.94% in 2021-22, indicating that the taxpayer base is widening as a result of the steps taken by the present government led by Prime Minister Narendra Modi.
• The gross corporate taxes also showed a significant growth of 55.6%, reflecting that the new simplified tax regime with low rates and no exemptions has lived up to its promise.
• On the indirect taxes front, GST has seen an exemplary growth during 2021-22 despite two waves of COVID-19 pandemic.
• The average monthly gross GST revenue in 2021-22 was Rs. 1.23 lakh crore, which is higher than the previous two years.

Question:

Q.1 What was India’s tax-to-GDP ratio in 2021-22?
a. 10.7%
b. 11.7%
c. 12.7%
d. 13.7%