"Geopolitical risks and tax reforms strain Centre's fiscal outlook for 2026-27"
Gross Tax Revenue (GTR)
total tax collected by the Centre before sharing with states under devolution.
Tax Buoyancy
ratio of percentage change in tax revenue to percentage change in GDP; measures revenue responsiveness.
India's central government finances rest on two broad revenue pillars: gross tax revenues (GTR) and non-tax receipts. GTR includes direct taxes such as personal income tax (PIT) and corporate tax, and indirect taxes, primarily Goods and Services Tax (GST). The Controller General of Accounts (CGA) tracks and publishes quarterly data on the Union government's receipts and expenditure, making it the primary source for in-year fiscal monitoring.
The concept of tax buoyancy is central to fiscal analysis. It measures how much tax revenue grows relative to GDP growth. A buoyancy of 1 means revenues grow at the same pace as the economy. A buoyancy below 1 signals that the tax system is not capturing economic growth efficiently. A buoyancy of zero, as seen in PIT in 2025-26, means revenue was essentially flat despite economic expansion.
Post-GST implementation in 2017, the indirect tax architecture was restructured. Multiple central and state levies were subsumed into a unified GST framework. This eliminated the cascading effect of taxes and introduced input tax credits at each stage of supply. However, it also reduced the independent tax-setting flexibility of both the Centre and states. Rate rationalisation — adjusting GST slabs to reduce the tax burden on consumers or correct anomalies — directly affects short-term revenue, even when the long-term goal is base expansion.
Revenue buoyancy is the ratio of the percentage change in tax revenue to the percentage change in nominal GDP. When buoyancy falls to zero or turns negative, it signals a structural problem: the tax system is not responding to economic activity. This can happen for three reasons. First, the tax base may be narrowing due to exemptions or rate cuts. Second, fast-growing sectors may be under-taxed or outside the tax net. Third, compliance and administration may be weak.
In 2025-26, the government undertook two major tax interventions. In PIT, rate rationalisation reduced the effective tax burden on individuals. In GST, substantive rate reductions were introduced across several categories. Both reforms were designed with a medium-term logic: accept an initial revenue sacrifice, then recover through a wider tax base as more economic activity enters the formal sector. …
Consider the following statements:
1.Tax revenue as a percent of GDP of India has steadily increased in the last decade.
2.Fiscal deficit as a percent of GDP of India has steadily increased in the last decade.
Which of the statements given above is/are correct?
With reference to the Union Government, consider the following statements:
1.The Department of Revenue is responsible for the preparation of Union Budget that is presented to the Parliament.
2.No amount can be withdrawn from the Consolidated Fund of India without the authorization from the Parliament of India.
3.All the disbursements made from Public Account also need the authorization from the Parliament of India.
Which of the statements given above is/are correct?
Which among the following steps is most likely to be taken at the time of an economic recession?
Which of the following best describes 'tax buoyancy' in the context of public finance?
Consider the following statements regarding the Fiscal Responsibility and Budget Management (FRBM) Act:
1.It requires the Centre to present a Medium-term Fiscal Policy Statement to Parliament.
2.It prohibits the Centre from borrowing from the Reserve Bank of India under any circumstances.
3.It applies only to the Central Government and not to state governments.
Which of the statements given above is/are correct?
Assertion (A): A government may accept a short-term fall in tax revenue when it reduces tax rates.
Reason (R): Lower tax rates can expand the tax base over time by improving compliance and bringing more economic activity into the formal sector.
Which of the following is correct?
Which of the following is/are examples of non-tax receipts of the Central Government?
1.Dividends from public sector undertakings
2.Proceeds from spectrum auctions
3.Corporate income tax collections
4.Disinvestment proceeds from sale of government equity
Select the correct answer using the code given below:
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