Corporate tax collection exceeds 3% of GDP in 2021–2022, following a 2-year break
- ByStartupStory | January 3, 2023
After a lapse of two years, India’s corporation tax collection as a percentage of GDP surpassed 3% in fiscal 2021–2022. (GDP). One of the factors that contributed to India Inc.’s increased profitability was the rise in demand for goods and services. In 2021–22, the GDP was estimated to be worth $236.64 lakh crore at the current market price, while the net corporation tax revenue was Rs 7.12 lakh crore. 3.01 percent of GDP is made up of net corporation tax. According to information on the collection of corporate taxes during a five-year period, this ratio reached its highest point in 2018–19. In 2018–19, corporate tax revenues totaled Rs 6.63 lakh crore, or 3.51 percent of GDP.
In 28 years, the government sought to lower corporate tax rates for new manufacturing units by almost 10 percentage points in 2019–20. Due to a decrease in the corporate tax rate, the mop up and ratio decreased to 2.77 percent of GDP in 2019–20.
In September 2019, the government lowered the tax rate and issued a rule stating that any Indian company that is incorporated on or after October 1 of that year and makes new investments in manufacturing is required to pay income tax at a rate of 15% as long as production begins on or before March 31, 2023. An additional year has been added to this.
Another rule was that domestic companies might pay taxes at a lower 22 percent if they gave up their rights to exemptions and perks. Additionally, the minimum alternate tax (MAT) was reduced from 18% to 15%.
Additionally, domestic businesses had the choice to forgo exemptions 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% to 15%. The tax drop was reflected in the corporate tax realization for 2019–20, which fell to Rs 5.56 lakh crore, or 2.77 percent of GDP.
Due to the effects of COVID-19 and the reductions in tax rates from the previous year, the ratio of corporate tax to GDP decreased even more between 2020 and 2021, falling to 2.31 percent. This year, there was a net corporation tax collection of Rs. 4.57 lakh crore.
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