New Delhi: Corporate tax receipts in the financial year 2021–2022 exceeded 3 per cent of the GDP after two years of decline. This improvement shows that India Inc.’s profitability is growing as a whole, driven by a rise in demand for goods and services, according to a report by PTI.
The report presented an analysis of five-year data on corporate tax collection and the country’s GDP. Although the FY22 corporate tax collection is higher it has not yet surpassed the 3.51 per cent of GDP mark set in 2018–19, which was a five-year high.
In actual terms, Rs 7.12 lakh crore was collected in net corporation tax in 2021–22. At the current market pricing, the Gross Domestic Product (GDP) was about Rs 236.64 lakh crore. 3.01 per cent was the calculated ratio of net corporate tax to GDP, according to the report.
The ratio was highest in 2018–19 when Rs 6.63 lakh crore was collected in net corporation tax accounting for 3.51 per cent of GDP.
Due to a decrease in the rate, the corporate tax mop up and ratio decreased to 2.77 percent of GDP in 2019–20. The government lowered corporation tax rates for new manufacturing units by nearly 10 percentage points, the largest decrease in 28 years. It was done in an effort to boost investments in the country.
While reducing the tax rate in September 2019, the government had said that any new domestic company formed on or after October 1, 2019, will have the option to pay income tax at the rate of 15 per cent if they commenced production on or before March 31, 2023. The period was later extended by another year till March 2024.
Additionally, domestic businesses had the choice to give up tax breaks and incentives in exchange for paying taxes at a lower 22 percent rate. Additionally, the Minimum Alternate Tax (MAT) rate was also lowered from 18.5 per cent to 15 per cent.
This step resulted in Corporate tax in 2019–20 decreasing to Rs 5.56 lakh crore, 2.77 per cent of GDP. Due to the combined effects of Covid-19 and tax rate reductions from the prior year, the corporate tax to GDP ratio decreased further the next year, in 2020–21, to 2.31 percent. Over Rs 4.57 lakh crore in net corporate tax revenue was collected in FY21.
The Budget estimates that gross corporation tax receipts for the current fiscal year will be around Rs 7.20 lakh crore (before accounting for refunds).
In the April-mid December period of the current fiscal, net corporate tax collection stood at Rs 6.06 lakh crore.
While the updated estimates of corporation tax collection for this fiscal will be disclosed in the Budget, which will be delivered on February 1, the advance estimates of GDP for the current financial year will be provided on January 6.