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India's tax collections have exhibited a sustained upward trajectory over the past decade, increasing from INR 12.45 lakh crore in FY15 to around INR 44 lakh crore by FY25. While indirect taxes accounted for a relatively higher share of total tax revenues in FY17 and FY21, this pattern has reversed in recent years, with direct taxes’ share of total tax revenues being nearly 58.5% in FY25.
From a distributional perspective, this shift is significant as direct taxes are inherently progressive, as they are linked to income and profitability, whereas indirect taxes are considered to be regressive, disproportionately affecting lower-income households through consumption. The rising share of direct taxes suggests an improvement in the progressivity of the tax system, with positive implications for equity and the overall incidence of taxation.
India’s direct tax collections have tripled over the last decade, from INR 6.96 lakh crore in FY15 to INR 22.22 lakh crore in FY25. Over the same period, corporate tax’s share in the direct tax kitty fell from 61.75% to 44.41%, with non-corporate taxes overtaking since FY21 onwards.
The number of income-tax return filers have increased sharply, with total filers rising from about 35 million in FY15 to over 85 million by FY25, largely driven by individual taxpayers. Faceless assessment, pre-filled returns, AIS/TIS reporting, and risk-based scrutiny have raised effective compliance.
The change in composition of the direct taxes can also be attributed to a combination of tax-base expansion and certain policy changes, namely re-introduction of LTCG tax on listed equities in 2018, shifting of burden of dividend taxation on shareholders after abolition of dividend distribution tax via Budget 2020 and corporate tax rates reduction, particularly for those opting for the new tax regime as well as manufacturing companies. After the slab rate changes for individuals carried out last year, there is however a softening in the growth of non-corporate tax collections.
In just eight years, GST (goods and services tax) has emerged as a productive and resilient revenue source, with collections reaching INR 22.08 lakh crore in FY25. This growth is driven not only by economic expansion but also by tech-nology-led compliance measures such as e-invoicing, e-way bills, and analytics-based enforcement, which have reduced revenue leakages and expanded the taxpayer base to over 1.5 crore active registrations.
Another key driver has been the shift to a unified tax framework, where both the Centre and the states tax the same transaction, ensuring seamless taxation across the value chain and strengthening revenue capture. Also, the shift from the earlier countervailing duty (CVD) regime to higher integrated GST (IGST) rates on imports has increased the effective tax incidence and strengthened GST collections.
Customs duty currently accounts for 6.1% of the Centre’s gross tax revenue, and collections have grown more moderately compared to GST, reflecting a structural shift toward domestic consumption-based taxation. According to the Economic Survey, customs collections fell by 7.3% year-on-year, highlighting their sensitivity to import volumes, global commodity prices, and trade policy changes.
Over the past decade, customs revenue trends have evolved across three phases: post-GST subsuming of CVD and SAD (special additional duty), pandemic-driven volatility, and the recent manufacturing localisation phase driven by initiatives like Make in India and Production Linked Incentives (PLI). The stronger growth in GST relative to customs underscores that domestic consumption and formal economic activity are now the primary drivers of indirect tax revenue, making India’s tax base more stable and resilient.
Customs revenue trends reflect the combined impact of tariff rationalisation and manufacturing-led policy initiatives such as Make in India, Atmanirbhar Bharat, and PLI schemes, which aim to boost domestic value addition and reduce import dependence. As domestic capacity strengthens through central and state incentives such as the ECMS scheme, customs revenue growth may moderate, reflecting a strategic shift toward domestic manufacturing and long-term economic resilience.
Additionally, FTAs and tariff actions by major economies may influence customs collections while strengthening export competitiveness and global value chain integration. Overall, customs trends reflect a strategic shift from import-dependent revenue toward policies aimed at boosting domestic manufacturing, improving self-reliance, and enhancing long-term economic resilience.
This article first appeared in the Financial Express on 27 February 2026.
