Widening tax net and increased tax collections are achievements of the recent government initiatives.
However, declining non-individual returns and rising cost of collections call for a closer examination.
What are the recent developments?
Various policy measures have ensured bringing more people under the direct tax net in the recent past.
The number of tax returns filed recently went up by about 24.6 per cent.
The latest direct tax collections were marginally higher than that presented in the Revised Estimates in the last Budget.
Personal income tax collections rose by 21 %, compared to 8% in the previous year.
Corporation tax collections rose by 7%, compared to 6% in the previous year.
Indirect tax net is also getting wider because of a rise in the number of entities getting registered under the goods and services tax (GST).
What are the points to be noted?
While individual tax returns went up, returns filed by non-individuals saw a drop of about 10 per cent during the same period.
This includes firms, companies, associations of persons, bodies of individuals and Hindu undivided families.
The drop could be due to -
the crackdown on shady or non-operating companies, used largely for engaging in questionable transactions in post-demonetisation phase.
the cancellation of over a million duplicate or multiple permanent account numbers has excluded a larger portion of the earlier tax filing firms.
States like Haryana, Karnataka, Tamil Nadu, West Bengal, Gujarat accounted for a considerable rise in tax collection in the post-demonetisation phase.
However, states like Maharashtra's and Delhi's growth in collections are much lower in percentage in comparison to the states above.
This is despite the fact that the two states together account for almost half of the country’s total direct tax collections.
Tax deduction at source and advance taxes as a share of total direct tax receipts of the Centre raises the question on the increased cost of collections.
What is to be done?
Government has to analyse deeper into the reasons for 10 per cent drop in filing of returns by non-individuals and the disparity among states.
Also, the impact of GST on the tax net is to be seen in the long run.
With the spread of digitisation and technology, efforts to ensure lower tax collection cost is of importance.
