The correct answer is: 65 percent.
Indirect taxes are taxes that are levied on goods and services, and are paid by the consumer when they purchase the goods or services. The most common types of indirect taxes are sales taxes, value-added taxes (VAT), and excise taxes.
Direct taxes are taxes that are levied on individuals or businesses, and are paid directly to the government. The most common types of direct taxes are income taxes, property taxes, and corporate taxes.
In India, indirect taxes account for a significant proportion of the government’s tax revenue. In the financial year 2020-21, indirect taxes accounted for 65.1% of the total tax revenue of the Union Government. This is higher than the share of direct taxes, which was 34.9% in the same financial year.
The high share of indirect taxes in India’s tax revenue is due to a number of factors. First, indirect taxes are relatively easy to collect, as they are levied on goods and services that are consumed by everyone. Second, indirect taxes are relatively efficient, as they do not require the government to track the income of individuals or businesses. Third, indirect taxes are relatively equitable, as they are paid by everyone, regardless of their income.
However, the high share of indirect taxes also has some drawbacks. First, indirect taxes can be regressive, as they place a greater burden on low-income households than on high-income households. Second, indirect taxes can be distortionary, as they can lead to changes in the prices of goods and services. Third, indirect taxes can be volatile, as they are affected by changes in the demand for goods and services.
Despite these drawbacks, indirect taxes are likely to continue to play a significant role in India’s tax system in the future. This is because indirect taxes are relatively easy to collect, efficient, and equitable.