In the past two and a half years, the Central government has experienced a consistent growth in tax collections, surpassing the rate of increase in nominal GDP. According to insiders from the Finance Ministry, this trend is the result of meticulous analysis of various data sets, initiated with demonetization and continued through the implementation of GST. These officials suggest that this pattern of tax revenue outpacing GDP growth is likely to persist for several more years.
For the third consecutive year, the rise in direct taxes has far exceeded the growth in nominal GDP. Notably, within the realm of direct taxes, income tax shows remarkable buoyancy.
So, what accounts for this success? High-ranking officials in the finance ministry attribute it to the combined impact of demonetization, GST implementation, and the rigorous efforts of tax authorities in pursuing suspected tax evaders.
Following demonetization, the income tax department compiled a substantial list of new taxpayers. They meticulously scrutinized this data, searching for commonalities such as addresses, directors, and promoters. This process revealed startling findings, including instances where 40-50 companies were registered under a single-room address in cities like Kolkata or Jaipur. Additionally, they identified clusters of companies linked through shared promoters or directors.