This being an election year, the Budget proposed by the Government had no new taxation provisions. Thus, the Income-tax Act that had been amended beyond recognition in the last sixty-three years, escaped some bruises for the present. In a welcome change, the inevitable post-Budget analysis on myriad TV channels, sometimes focussed on more substantial issues, showing that taxpayers are curious to know the basis on which they are taxed and whether the present tax system is fair to the honest taxpayer, and how well his concerns have been handled by the tax administration.

While posts on WhatsApp would have us believe that taxpayers, who are allegedly in a minuscule minority, are a muchharassed lot, the Government pushes a diametrically opposite narrative viz. Indians are significantly undertaxed. Both views need correction. According to the latest Oxfam report “Survival of the Richest: The India Story,” a little less than two-thirds (64.3 per cent) of the total GST is paid by the bottom 50 percent of the population, one-third of the GST is collected from the middle 40 per cent and only 3-4 percent from the richest 10 per cent of the country, half of whom also pay income-tax, and propagate the narrative of besieged taxpayers. The other view is equally faulty. After presentation of the interim budget, in a press interview, the Revenue Secretary (RS) stated that tax to GDP ratio had touched 11.6 per cent in FY 2023-24 and was poised to reach an all-time high of 11.7 per cent next year. It would appear that taking a decidedly narrow view, the RS had considered only taxes levied by the Centre, i.e., Income-tax, GST and Central Excise, for working out the taxto-GDP ratio. However, if we take taxes levied by States into account, tax-to-GDP ratio touches 17.7 per cent. To illustrate, as on 31 March 2023, India’s nominal GDP was Rs.273 lakh crore, and tax receipts totalled Rs.48.4 lakh crore, (Central tax revenue of Rs.30.4 lakh crore plus States’ own tax revenue of Rs.18 lakh crore) giving a tax to GDP ratio of 17.7 per cent, which is more compatible with the World Bank’s study of developing economies, according to which tax revenues above 15 per cent of a country’s GDP are necessary for economic growth and poverty reduction.

Tax revenues above this level ensure that a country has the necessary funds to invest in public infrastructure and achieve........

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