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April-June sees higher tax collections compared to past 2 years; is India seeing K-shaped recovery?

Updated : July 19, 2021 20:34:47 IST

Corporate tax collection has been excellent in the Q1 of fiscal year 2021-22. While it is 124 percent higher than last year, it might be because of COVID impact; hence it is compared with 2019 and even then the rise is 71 percent over 2 years. Therefore, even if divided over two years it is a 35 percent growth.

Like corporate tax, personal income tax has also seen a huge rise over the last year and the year before. Personal income tax rose 93 percent over the last year (COVID year) and it is a rise of 23 percent compared to 2019 collection, which was a normal year. So, the annual growth of personal income tax over the past two years, despite COVID is 12 percent, which is much better than the nominal GDP growth.

Union excise duty collections, which is largely collections from fuel is also steeply higher. Union excise is up 186 percent over last year, which could be because of zero activity due to lockdown; but it is also up 173 percent over 2019; indicating an annual 80 percent growth in excise duty collections.

Customs duty collections, however, rose only marginally higher, just 6 percent over the past two years.

So, putting all the tax collections -- corporate, personal, excise and customs -- the increase over the last year is very good and increase over 2019 is also over double and the annual increase comes to 55 percent.

Therefore, it looks like the economy has rebounded smartly and contraction appears to be only in unorganised sector. So, the organised sector has emerged not just unscathed but probably stronger. All this gives some credence to the theory that India is indeed facing a K-shaped recovery theory. The only caveat is we do not have the refund number.

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