Tax Expenditures on Union Taxes in India from 2005–06 to 2019–20

Abstract

Abstract The Union government foregoes revenue on account of various tax exemptions/incentive schemes promoted for various purposes. Like the Union government, state governments also provide tax incentives but the revenue impacts of those tax-exemption schemes are yet to be assessed. The present chapter assesses the trends and patterns of tax expenditures of the Union taxes from 2005–06 to 2019–20 and finds that overall tax expenditures of the Union government declined from 8.15 per cent of GVA in 2008–09 to 1.69 per cent in 2019–20. This was possible mainly on account of the continuous reduction of tax expenditures on indirect taxes. Tax expenditures on direct taxes also declined from 32.7 per cent of direct tax collection in 2008–09 to 22.4 per cent in 2019–20. The tax expenditures related to Union excise duty and customs duty declined from 15.2 per cent in 2008–09 to 12.6 per cent of indirect tax collection in 2019–20.