It asked the government to ensure that the existing tax structure is friendly to the taxpayer population, which is 8.5% of the total population and 91.5% of the population is cross-subsidised.
The report said that out of 114 million tax-paying households, 8.5% of the total population contributed ₹75 lakh crore or 65% of private final consumption expenditure. It said, “It is important and ethical that even formally, we should support honest tax paying households, especially indirect taxes on items like fuel, through a better designed tax structure”.
formal
SBI Research expects the formalization rate in this fiscal to be higher than last year but lower than the level of 2018-19.
The starting point of the study was the assumption that the shrinkage in the economy after the outbreak of Covid-19 was mostly informal and hence the reduction in output across all sectors would measure up to the informal sector.
“By making this assumption, we ensure that the informal economy is still large in size as the economy shrinks even as it is formal. Employing this method and rigorous data validation, this article estimates that the informal economy at present is probably the maximum 15. -20% of formal GDP,” the report said, adding that there was wide variation in the post-pandemic sectors such as finance and insurance.