Corporation tax in India: The road travelled so far

Abstract

Tax levied in India by the Government of India comprises two categories-direct tax and indirect tax. As a proportion of gross tax revenue, direct taxes have been accounting for over half of the total since 2007-2008. Corporation Tax is the highest contributor to direct taxes in the country. The focus of this article is to trace the origin of corporation tax in the country and to examine its growth and trend. Data have been collected and compiled from the Indian Economic Survey Reports, Reports of Comptroller and Auditor General of India and other relevant websites. The pace at which corporate sector has grown over a period of time is remarkably noteworthy. Tax-GDP ratio can be defined as the total tax collected by the government divided by the country's GDP. From the data compiled, we find that the share of direct taxes in total tax revenue has been gradually increasing. There has been improvement in the ratios of personal Income tax and corporate income tax to GDP. The improvement has been much greater in case of corporate income tax. A significant development in recent past in terms of composition of taxes has been the growth of direct taxes especially in corporate income tax. Despite the criticisms against corporation tax, it has emerged as an important source of revenue due to the rising importance of corporate sector on one hand and because of its impersonal nature on the other.