News & Insights

Covid-19 Riddle: Over 40,000 Manufacturers Vanish from Tax Records

Published: November 28, 2023

India’s manufacturing sector has been hit hard by the aftermath of the COVID-19 pandemic, with nearly 40,175 manufacturers dropping out of the taxpayers’ list, according to recent data. In the assessment year 2019-20 (AY20), a total of 816,021 manufacturers paid taxes, representing their income in the previous financial year. However, around five per cent of them have since dropped off the list, leaving a total of 775,846 taxpayers in AY22.

Interestingly, the divergence between corporate and non-corporate manufacturers is apparent. Corporate manufacturers saw a significant increase of over 10,000 taxpayers between AY20 and AY22. Meanwhile, non-corporate taxpayers witnessed a decline of over 50,000.

Several sectors within the manufacturing industry have suffered during the pandemic. Textiles and apparel, including handloom textiles (khadi), were notably affected. Both corporate and non-corporate taxpayers in this sector experienced a decline. In the jewellery sector, for every new corporate taxpayer, approximately 33 non-corporate taxpayers dropped out.

These challenges faced by the manufacturing sector are reflected in the Union Budget annexures, which provide insights into company profits by sector. In FY16, manufacturing companies accounted for 46.7 per cent of profits, but this figure dropped to 29.5 per cent by FY21. Correspondingly, the share of taxes due from manufacturing companies fell from 42.8 per cent to 34.1 per cent during the same period.

Data from the Centre for Monitoring the Indian Economy reveals that the manufacturing sector’s share of the overall economy stood at 17.72 per cent in the fiscal year 2022-23, down from 18.29 per cent in 2018-19. This indicates the significant impact of the Covid-19 crisis on India’s manufacturing industry.

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