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The government’s tax collection has maintained a decent growth rate in the last couple of years even as the economy has recovered from the Covid shock. Inflation has played a role in this by contributing to higher nominal economic growth, but there are also a few other factors at play, and they deserve closer scrutiny. More significantly, growth in collection from the different types of taxes is not uniform and this too needs to be examined to understand if the post-Covid trend of higher tax collection is sustainable.
Let us first look at direct taxes. After suffering a decline of almost 8 per cent in 2019-20 and another 10 per cent in 2020-21, direct taxes are on a roll — they bounced back with a growth rate of 49 per cent in 2021-22 and again with 18 per cent in 2022-23. The performance of goods and services tax (GST) was even better in the post-Covid years. Growth in GST collection in 2019-20 was 4 per cent but collection fell by 7 per cent in the
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