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State-Level Value Added Tax and Its Revenue Implications in India

Author

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  • Damodar Nepram

    (The author is Reader, Department of Economics, Manipur University, Canchipur, Imphal 795003, Manipur, India; email: dnepram@yahoo.co.in)

Abstract

Sales tax was the most important state tax in India, contributing a significant proportion of their receipts. However, the tax itself had many drawbacks, that is, double taxation, multiplicity of rates, tax competition, etc., as a result of which its reform was considered a necessity. After much preparation, the tax was replaced by the value added tax (VAT) from April 2005 by most states as a part of domestic trade reforms being initiated in the country. The present study using panel data analysis finds that the adoption of VAT has been a good source of revenue.

Suggested Citation

  • Damodar Nepram, 2011. "State-Level Value Added Tax and Its Revenue Implications in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(2), pages 245-265, May.
    • Handle: RePEc:sae:mareco:v:5:y:2011:i:2:p:245-265
    DOI: 10.1177/097380101100500204
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    References listed on IDEAS

    as
    1. Sharma, Chanchal Kumar, 2004. "Implementing VAT in India :Implications for Federal Polity," MPRA Paper 206, University Library of Munich, Germany, revised 25 Feb 2005.
    2. Keen, Michael & Lockwood, Ben, 2010. "The value added tax: Its causes and consequences," Journal of Development Economics, Elsevier, vol. 92(2), pages 138-151, July.
    3. K., Jothi Sivagnanam & M., Naganathan, 1999. "Federal Transfers and the Tax efforts of the States in India," MPRA Paper 3208, University Library of Munich, Germany.
    4. Ms. Janet Gale Stotsky & Ms. Asegedech WoldeMariam, 1997. "Tax Effort in Sub-Saharan Africa," IMF Working Papers 1997/107, International Monetary Fund.
    5. Prasant Kumar Panda, 2009. "Central Fiscal Transfers and States’ Own-Revenue Efforts in India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 3(3), pages 223-242, July.
    6. Shoup, Carl S, 1988. "The Value Added Tax and Developing Countries," The World Bank Research Observer, World Bank, vol. 3(2), pages 139-156, July.
    7. Rao, M. Govinda & Choudhury, Mita & Anand, Mukesh, 2005. "Resource Devolution from the Centre to States: Enhancing the Revenue Capacity of States for Implementation of Essential Health Interventions," MPRA Paper 24387, University Library of Munich, Germany.
    8. Keen, Michael & Lockwood, Ben, 2006. "Is the VAT a Money Machine?," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(4), pages 905-928, December.
    9. Abhijit Sen Gupta, 2007. "Determinants of Tax Revenue Efforts in Developing Countries," IMF Working Papers 2007/184, International Monetary Fund.
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    Cited by:

    1. Mukherjee, Sacchidananda, 2017. "Changing Tax Capacity and Tax Effort of Indian States in the Era of High Economic Growth, 2001-2014," Working Papers 17/196, National Institute of Public Finance and Policy.

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    More about this item

    Keywords

    Sales Tax; VAT; Revenue; JEL Classification: H25; JEL Classification: H71; JEL Classification: C33;
    All these keywords.

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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