The revenue augmenting strategy encompassed moderating the tax rates and broadening the tax base through expansion in the scope of taxes, specifically service tax, removal of exemptions, some improvement in tax administration with a focus on arrears recoveries.
Reflecting these measures, the tax-GDP ratio of the Centre has steadily risen from 8.8 per cent in 2002-03 to 11.3 per cent in 2006-07(RE) and 11.8 per cent in 2007-08 (BE). The entire increase in tax revenues was mainly on account of the buoyancy in direct taxes.