Taxation & Revenue Mobilisation: Analyse the changing composition of India's tax revenue — Corporation Tax, Income Tax, GST, Excise, and Customs — over the last three Union Budgets. What trends emerge?

Question

PocketIAS · Accepted Answer

Introduction:

Over the last three Union Budgets (FY24–FY26), India’s tax structure shows a rebalancing between direct and indirect taxes, alongside changing policy priorities.

Body:

A clear trend is the rising prominence of direct taxes, especially personal income tax. Strong compliance measures, digitisation, and formalisation have led to robust growth, with income tax collections increasingly rivaling or surpassing corporation tax. Corporation tax, while stable, has not seen proportionate growth after the 2019 rate cuts, reflecting both policy choices and uneven private investment recovery. This indicates a shift where households contribute a growing share of tax revenues.

GST remains the backbone of indirect taxation, showing steady buoyancy due to improved compliance (e-invoicing, GSTN analytics) and economic recovery. However, its share has stabilised rather than sharply increased, pointing to structural constraints in consumption growth. Meanwhile, Union excise duties—particularly on petroleum—have declined as a share of revenue due to calibrated duty cuts to manage inflation, reducing the Centre’s fiscal cushion. Customs duties have seen selective increases in line with Atmanirbhar Bharat, aimed at promoting domestic manufacturing, though their overall share remains modest.

Conclusion:

The emerging pattern is a shift toward direct taxes and a more compliance-driven GST system, alongside reduced reliance on fuel-based excise. Going forward, broadening the tax base, enhancing GST efficiency, and ensuring a balanced tax mix will be key to sustainable revenue mobilisation.

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