Since 2008-09, the share of direct taxes in total gross tax collections by the Centre has always stayed higher than that of indirect taxes, barring two years — in 2016-17 (the year of demonetisation) and 2020-21 (the year that bore the full impact of Covid).

The finance ministry’s analysis for the effective tax rate for companies shows that from about 24.67 per cent in 2014-15, it had already come down to 22 per cent in 2020-21. The effective tax rate is likely to have become lower in 2021-22 and 2022-23.

Tax systems with a high component of indirect taxes are considered regressive since the burden of such taxes falls on everyone irrespective of their capacity to pay unlike direct taxes such as taxes on income or on profits of companies, which only apply to those with incomes above a threshold level or to firms that are profitable.