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Covid-19: How tax collection trends have changed in the year of the pandemic

 The amount of tax that a common man in India is paying to the government has steadily risen. The most visible of these changes is the rise in petrol price and diesel price. Indirect tax in India is higher than direct taxes and individual tax is on par with corporate taxes. What does this rise in taxes mean for the economy and household expenses? BOOM Explains.

A K Bhattacharya, Editorial Director, Business Standard says that direct taxes in 1990-91 as a percent of GDP in 1991 was just 2%. And indirect taxes as percent of GDP 1991 was 8%. What has happened now is more or less the reverse in the sense that direct taxes are still around 4.5% of GDP but indirect taxes have gone to 5.4% of the GDP. What has happened in 2020-2021 is a reflection of the pandemic, the stress and most importantly, the huge taxes that were levied on petroleum products. Excise duty on petrol today would account for almost 2% of GDP, while it was less than a percent even five years ago.

Dinesh Kanabar, veteran taxman and CEO of Dhruva Advisors, says petroleum has been a boon to the government. The prices of petroleum today are equal to what it was earlier when the price of petroleum globally was twice what it is today. The reduction in the prices has been substituted with the higher levies that the government is making. It is one of the reasons why the government has got petroleum in the GST net. This trend will only go up.

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