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Indirect Tax Reform and Fiscal Federalism in India

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  • Raghbendra Jha

Abstract

This paper underscores the substantial spatial disparities across India and evaluates the case for putting together (various versions) of the Goods and Service Tax (GST) and also indicates the risks involved in the process. This paper argues that, on balance, there is a case for an appropriately constituted GST but that the federal transfer formula must be sensitive to any fallout from such a move. The paper also argues that there is an urgent need to review the totality of transfers from the central to state governments and local bodies. This review would include transfers through Finance Commission, Planning Commission and Centrally Sponsored Schemes. There is a compelling necessity to review and recalibrate the entire gamut (and not piecemeal) of federal relations – tax, expenditure and transfers. This is critical to ensure the stability and predictability needed to ensure that India's state driven growth blossoms and attains full fruition.

Suggested Citation

  • Raghbendra Jha, 2013. "Indirect Tax Reform and Fiscal Federalism in India," ASARC Working Papers 2013-09, The Australian National University, Australia South Asia Research Centre.
    • Handle: RePEc:pas:asarcc:2013-09
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    File URL: https://crawford.anu.edu.au/acde/asarc/pdf/papers/2013/WP2013_09.pdf
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    References listed on IDEAS

    as
    1. Emran, M. Shahe & Stiglitz, Joseph E., 2005. "On selective indirect tax reform in developing countries," Journal of Public Economics, Elsevier, vol. 89(4), pages 599-623, April.
    2. Indira Rajaraman, 2007. "The Political Economy of the Indian Fiscal Federation," India Policy Forum, Global Economy and Development Program, The Brookings Institution, vol. 4(1), pages 1-51.
    3. Jha, Raghbendra & Gaiha, Raghav & Pandey, Manoj K. & Kaicker, Nidhi, 2013. "Food subsidy, income transfer and the poor: A comparative analysis of the public distribution system in India's states," Journal of Policy Modeling, Elsevier, vol. 35(6), pages 887-908.
    4. Commission, Planning, 2011. "India Human Development Report 2011: Towards Social Inclusion," OUP Catalogue, Oxford University Press, number 9780198077589.
    5. Hope,Nicholas C. & Kochar,Anjini & Noll,Roger & Srinivasan,T. N. (ed.), 2013. "Economic Reform in India," Cambridge Books, Cambridge University Press, number 9781107020047.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Bhattarai, Keshab, 2017. "Impacts of GST reforms on efficiency, growth and redistribution of income in India: A Dynamic CGE Analysis," MPRA Paper 92139, University Library of Munich, Germany.

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    More about this item

    Keywords

    Fiscal Federalism; GST; federal transfers; India;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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