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40,175 Manufacturers Vanish From Tax Data

By Sachin P Mampatta
December 23, 2023 12:25 IST
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Manufacturing's share in the profit pool of companies had declined before the pandemic.

IMAGE: Kindly note the image has been posted only for representational purposes. Photograph: Kind courtesy Nataliya Vaitkevich/ and OpenClipart-Vectors/

As many as 40,175 manufacturers dropped out of India's list of taxpayers in the aftermath of COVID-19 that struck the world early in 2020.

A total of 816,021 manufacturing businesses paid taxes in assessment year 2019-2020 (AY20), broadly corresponding to income they earned in Financial Year 2018-2019 (FY19).

Nearly five per cent of them dropped out of the taxpayers list, which stood at 775,846 in AY22.

It is not clear if the situation has improved as tax numbers are only available till AY22. But a third of manufacturing segments showed output below where they were more than a decade ago, Business Standard had reported in October.

There is a divergence between corporate manufacturers and others. Businesses typically structure themselves as 'corporates' after attaining a certain size.

Many small businesses are not corporates. The number of corporate taxpayers in manufacturing rose by more than 10,000 between AY20 and AY22. The number of non-corporate taxpayers fell by over 50,000 (chart 1).

Textiles and apparel are among sectors that were affected during COVID-19.

Around six non-corporate taxpayers that manufacture apparel dropped out of taxpayers' list for every new corporate entity added during AY20-22.

Around 14 non-corporate taxpayers dropped out for every corporate entity added among non-handloom textile manufacturers in the same period.

There was decline in both corporate and non-corporate taxpayers among those manufacturing handloom textiles (khadi).

In jewellery manufacturing, around 33 non-corporate taxpayers dropped out for every new corporate tax payer (chart 2).

The hit on manufacturing is reflected in data in Union Budget annexures, which show company profits by sector.

Manufacturing companies' share of profits was 46.7 per cent in FY 2015-2016. The rest of the company profits came from non-manufacturing segments like services.

Manufacturing's share dropped to 29.5 per cent by FY21. The share of manufacturing companies in taxes due fell from 42.8 per cent to 34.1 per cent during this period (chart 3).

The government is attempting to revive manufacturing through initiatives like the production-linked incentive scheme.

The share of manufacturing in the economy was 17.72 per cent in 2022-2023, shows data from the Centre for Monitoring Indian Economy. It was 18.29 per cent in 2018-2019.

Manufacturing's share in the profit pool of companies, as seen in chart 3, had declined before the pandemic. It had already dropped from 46.7 per cent in 2015-2016 to 37.8 per cent in 2018-2020.

Feature Presentation: Ashish Narsale/

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Sachin P Mampatta
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