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Analytical Study of Tax Revenue Collection in India

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 OUR HERITAGE
ISSN (Online) : 0474-9030 Vol-68, Special Issue-7
Impact Factor (2020) - 6.8
Special Issue on "Tax Reform for Developing Viable and
Sustainable Tax System in India"

Analytical Study of Tax Revenue Collection in India

Dr. Kishor P. Bholane

Head, Department of Commerce
Vinayakrao Patil Mahavidyalaya, Vaijapur.
Email ID – kishor_bholane@rediffmail.com

Abstract
Taxation structure plays an important role in country’s development. India has a well-developed
tax structure. The power to levy taxes and duties is distributed among the three tiers of Government, in
accordance with the provisions of the Indian Constitution. This research paper is based on secondary
data and examined total tax collection from 2013-14 to 2017-18 in terms of direct tax and indirect tax
and its subtypes. Tax to GDP ratio is also examined.

Keywords: Revenue, Direct Tax, Indirect Tax, GDP etc.

Introduction:
Indian tax system is designed primarily to raise sufficient revenue to meet the requirements of the
government for public expenditure, administration and allied services. Taxation is used as an instrument
for reducing private consumption and transferring resources to the government to enable it to undertake
large-scale public investment. It is also used as a tool to reduce inequalities in respect of income and
wealth.
Concept of Tax:
The word ‘tax’ is derived from the Latin word ‘Taxo’. Tax is the compulsory financial charge
levied by the government on income, commodity, services, activities or transactions. Taxes are the basic
source of revenue for the government, which are utilized for the welfare of the people of the country.
Taxes in India are levied by the central government and the state governments. Some minor taxes are also
levied by the local authorities such as the Municipality. Article 265 of the Constitution states that no tax
shall be levied or collected except by the authority of law. Therefore, each tax levied or collected has to
be backed by an accompanying law, passed either by the Parliament or the State Legislature.
Tax Structure in India:
Tax structure in India is a three tier federal structure. The central government, state governments
and local municipal bodies make up this structure. Taxes are classified under two categories namely direct
taxes and indirect taxes. The largest difference between these taxes is their implementation. Direct taxes
are paid by the assessee while indirect taxes are levied on goods and services.
a) Direct Taxes: Direct taxes are those which the tax payer pays directly from his income/
wealth/estate etc. They are levied on individuals and corporate entities and cannot be transferred
to others. These include Income Tax, Wealth Tax, Gift Tax, Corporate Tax, Estate Duty, Fringe
Benefit Tax etc.
b) Indirect Taxes: Indirect taxes are taxes which are not directly paid by the assessee to the
government authorities. These are levied on goods and services and collected by intermediaries
(those who sell goods or offer services). These include Value Added Tax (VAT), Customs Duty,
Excise Duty, Goods and Service Tax etc.

P a g e | 41
 OUR HERITAGE
ISSN (Online) : 0474-9030 Vol-68, Special Issue-7
Impact Factor (2020) - 6.8
Special Issue on "Tax Reform for Developing Viable and
Sustainable Tax System in India"

Review of Literature:
Mario Mansour (2015) has carried research on trends in taxation and revenue in MENA
countries. He concluded that income tax (not indirect taxes) have partially compensated for lost revenue
from trade liberalization while the revenue from indirect taxes have played an unimportant role as
revenue tool. Kumat, 2014 in his research paper focused on the overview of Indian tax system and
challenges ahead. He thinks that there should be a coordinated consumption tax system. He also states
that improving the productivity of Indian tax system continues to be a major challenge in India. Jha, 2013
in his research paper on Tax structure in India & its effect on corporate and individual in India suggests
that high dependence on indirect taxes should be reduced and direct taxes should be in increased on super
rich to compensate the losses. He also states that corporate tax evasion techniques like transfer pricing
should be checked. William G. Gale, Benjamin H. Harris (2011) focused on the challenges and
opportunities that the fiscal problem creates for raising revenues and reforming taxation it is concluded
that Revenue increases will be an important component of any resolution to the fiscal problem facing by
any country. Rao, 2005 in his research paper on Tax system reforms in India: achievement and challenges
ahead focuses on the union and state level reforms. He state that the reforms are just the beginning and
considerable distance in reforming the tax system is yet to be covered
Objectives of the Study:
1) To examine the tax structure of India.
2) To study the tax revenue collection in terms of direct and indirect taxes.
3) To study the contribution of direct and indirect taxes in total tax revenue collection.
4) To examine the tax to GDP ratio.
5) To offer effective suggestions.
Research Methodology:
This research paper is purely based on secondary data. Various figures are obtained from the
newspapers, journals, websites and annual reports of Ministry of Finance of Government of India.
Analysis of Data:
Table no. 1 shows that direct tax collection and indirect tax collection increased from Rs. 648966
crores and Rs. 1230177 crores in 2013-14 to Rs. 996185 crores and Rs. 2015743 crores in 2017-18.
Direct tax and indirect tax collectively increased from Rs. 1879143 crores in 2013-14 to Rs. crores in
2017-18.
Table No. 1: Tax Revenue Collection in India (Rs. in Crore)
Year Direct Tax Indirect Tax Total

2013-14 648966 1230177 1879143

2014-15 703508 1336518 2040026

2015-16 752231 1583252 2335483

2016-17 859481 1831969 2691450

2017-18 996185 2015743 3011928

Source: Indian Public Finance Statistics 2017-2018, Ministry of Finance.

P a g e | 42
 OUR HERITAGE
ISSN (Online) : 0474-9030 Vol-68, Special Issue-7
Impact Factor (2020) - 6.8
Special Issue on "Tax Reform for Developing Viable and
Sustainable Tax System in India"

Table no. 2 shows that direct taxes contributed 33.35% (on an average) in total tax collection,
whereas indirect taxes contributed 66.95% (on an average) in total tax collection. This shows that the
amount received from indirect taxes is almost double than the amount received from direct taxes.
Table No. 2: Percentage Share of Direct and Indirect Taxes in Total Tax Revenue
Year Direct Tax Indirect Tax Total

2013-14 34.54 65.46 100

2014-15 34.49 65.51 100

2015-16 32.21 67.79 100

2016-17 31.93 68.07 100

2017-18 33.07 66.93 100

Average 33.25 66.75 100

Source: Indian Public Finance Statistics 2017-2018, Ministry of Finance.
Table no. 3 shows that corporation tax is the major contributor in direct tax revenue collection
followed by income tax, land revenue, agricultural tax and hotel receipt tax. While other taxes contributed
Rs. 8189 crores in direct tax revenue collection in 2017-18.
Table No. 3: Direct Tax Revenue Collection (Rs. in Crore)
Types 2013-14 2014-15 2015-16 2016-17 2017-18

Corporation Tax 394678 428925 453228 493924 538745

Income Tax 237870 258374 280323 345779 433494

Estate Duty 0 0 1 0 0

Interest Tax 8 6 5 0 0

Wealth Tax 1007 1086 1079 0 0

Gift Tax 1 0 0 0 0

Land Revenue 9021 8773 10798 12109 15543

Agricultural Tax 149 90 99 102 113

Hotel Receipts Tax 64 73 83 91 100

Expenditure Tax 1 1 4 0 0

Others 6160 6170 6612 7476 8189

Source: Indian Public Finance Statistics 2017-2018, Ministry of Finance.
Table no. 4 shows that general sales tax is the major contributor in indirect tax revenue collection
followed by union excise duties, service tax, custom duty and state excise duty. While other taxes
contributed Rs. 15008 crores in indirect tax revenue collection in 2017-18.

P a g e | 43
 OUR HERITAGE
ISSN (Online) : 0474-9030 Vol-68, Special Issue-7
Impact Factor (2020) - 6.8
Special Issue on "Tax Reform for Developing Viable and
Sustainable Tax System in India"

Table No. 4: Indirect Tax Revenue Collection (Rs. in Crore)

Types 2013-14 2014-15 2015-16 2016-17 2017-18

Customs 172085 188016 210338 217000 245000

Union Excise Duties 169455 189038 287149 386415 405920

Service Tax 154780 167969 211414 247500 275000

State Excise Duty 85557 94178 106598 117925 134173

Stamp & Registration Fees 80528 87050 96203 96388 107804

General Sales Tax 475131 506106 550987 632474 710798

Taxes on Vehicle 37471 40927 46842 53581 62766

Entertainment Tax 2198 2385 2731 2905 3428

Taxes on Goods &
19578 19614 23373 26584 17023
Passengers
Taxes & Duty on
22485 25733 31093 33112 36330
Electricity
Taxes on Purchase of
163 1148 1532 3242 2493
Sugarcane
Others 10745 14354 14990 14841 15008
Source: Indian Public Finance Statistics 2017-2018, Ministry of Finance.
Table no. 5 shows that on an average direct tax to GDP, indirect tax to GDP, total tax to GDP
ratios are 5.66, 11.38 and 17.04 respectively. This means that indirect tax is the major contributor in GDP
of India than direct tax.
Table No. 5: Tax-GDP Ratio
Year Direct Tax Indirect Tax Total

2013-14 5.78 10.95 16.73

2014-15 5.64 10.72 16.36

2015-16 5.46 11.50 16.96

2016-17 5.59 11.93 17.52

2017-18 5.83 11.79 17.62

Average 5.66 11.38 17.04

Source: Indian Public Finance Statistics 2017-2018, Ministry of Finance.

P a g e | 44
 OUR HERITAGE
ISSN (Online) : 0474-9030 Vol-68, Special Issue-7
Impact Factor (2020) - 6.8
Special Issue on "Tax Reform for Developing Viable and
Sustainable Tax System in India"

Conclusions and Suggestions:

Tax collection in India is dependent on indirect taxes. Corporation tax is the major contributor in
direct tax revenue collection. General sales tax is the major contributor in indirect tax revenue collection.
The contribution of indirect tax in GDP is more than that of direct tax. Government should try to increase
the share of direct tax in total tax revenue collection and for that structural reforms should be brought by
the government. There is high need to consolidate and simplify the tax laws.

References
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Management and Social Science, Vol. 3 (9), pp. 242-252.
[2] Jha A. (2013). Tax Structure in India and effect on corporates. International Journal of Management
and Social Sciences research (IJMSSR), Vol. 2(10), pp. 80-82.
[3] Kumat H. (2014). Taxation Laws of India- An Overview and Fiscal Analysis 2013-14. Indian Journal
of Applied Research, Vol. 4(9), pp. 82-84.
[4] Rao G. M. (2005). Tax System Reform in India: Achievement and Challenges ahead. Journal of
Asian Economics, Vol. 16(6), pp. 993-1011.
[5] Bholane K. P. (2013). A Policy Shift from Economic Growth to Green Growth with Special
Reference to India. EXCEL International Journal of Multidisciplinary Management Studies, Vol.
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[6] Bholane K. P. (2013). FDI in Indian Retail Sector – Advantages and Disadvantages. ZENITH
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[7] Bholane K. P. (2015). Prospects Delhi-Mumbai Industrial Corridor. Conference Proceeding onDMIC-
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[8] Bholane K. P. (2017). Structure and Impact Assessment of GST in India. Vidyawarta Research
Journal - Special Issue, pp. 275-281.

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