The corporate tax-to-GDP ratio crosses the 3% mark in 2021-22, for the first time in two years – Mintpaisa

India’s corporate tax collection exceeds 3% of the country’s gross domestic product (GDP) for the first time in two years. In 2021-22, the corporate tax to GDP ratio reflected an overall improvement in India Inc’s profitability.

The net corporate tax collection in 2021-2022 stood at Rs 7.12 lakh crore, which is equivalent to 3.01% in terms of ratio to GDP. At the current market price, the collections stood at Rs 236.64 lakh crore.
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Despite a return to the 3% bracket, corporate tax collections have yet to surpass the five-year high of 3.51% of GDP recorded in 2018-19., when the net collection of the corporate tax stood at Rs 6.63 lakh crore.

A reduction in the corporate tax rate over the period 2019-2020 led to a reduction and a shift in the ratio to 2.77% of GDP. In the biggest cut in 28 years, the government cut corporate tax rates for new manufacturing units by almost 10 percentage points as it sought to boost investment.

While reducing the tax rate in September 2019, the government had said that any new national company incorporated on or after October 1, 2019, making new investments in the manufacturing sector, would be able to pay income tax at the rate by 15% if it started production on or before March 31, 2023. The period was later extended by one year, until March 2024.

In addition, domestic companies were given the option of paying taxes at 22% if they waived exemptions and incentives. In addition, the Alternative Minimum Tax (MAT) rate has also been reduced to 15% from 18.5%.

The tax cut was reflected in the realization of corporate taxes in 2019-20, when collections fell to over Rs 5.56 lakh crore (2.77% of GDP). The following year, the corporate tax-to-GDP ratio fell further to 2.31% due to the combined impact of COVID-19 and the previous year’s tax rate reductions . Net corporate tax collection was over Rs 4.57 lakh crore.

In the current financial year, the budget fixed the gross collection of corporation tax (before adjustment for refunds) at Rs 7.20 lakh crore. During the period from April to mid-December of the current financial year, net corporate tax collection stood at Rs 6.06 lakh crore.

Advance estimates of GDP for the current fiscal year would be released on January 6, while revised estimates of corporate tax collection for this fiscal year will be revealed in the budget to be presented on February 1.

With PTI entries


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