The growth in India Inc’s earnings remained subdued in recent years — in FY18, ratio of corporate profits to GDP fell to a 15-year low — but firms’ tax outgo rose at a steady pace during the period. Of a sample of 3,486 listed companies tracked by Capitaline, taxes paid as a percentage of operating profit grew from 14.9% in FY16 to 16.1% in FY19; against net profit, the tax outgo of these firms rose from 42% to 51% in the period.
Several factors have been behind the government raking in higher taxes from a stressed Corporate India. But phasing out of profit-linked incentives that pushed the effective corporate tax rate higher, stricter implementation of anti-avoidance rules and the introduction of GST which facilitated more efficient cross-matching of direct and indirect tax data are cited by analysts as the chief ones.