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Goods and Services Tax for India

Author

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  • R. Kavita Rao

    (NIPFP)

Abstract

Indirect taxes on goods and services at the state level constitute 85 percent of own tax revenue of the state governments of which sales tax alone accounts for 61 percent. A change in regime in recent times from cascading types sales taxes to taxes based on input-tax credit within taxation of goods, as well as the adoption of a uniform rates of tax, has resulted in buoyant revenues. However, the reform agenda is far from complete. The proposed GST regime constitutes the next step towards comprehensive reforms of indirect taxes in India. It would be the final step or a step in the right direction, depending on how the country chooses to define the constituents of this new regime. Decisions on the design of the proposed tax are not yet in the public domain. In this context, the objective of this paper is twofold : First, to identify the likely form of the proposed tax and the contentious issues that need a resolution before the tax can be implemented effectively. Second, given the importance of indirect taxes in the portfolio of the states, since any change would not affect all states uniformly, an attempt would be made to project the likely impact of one particular design of GST on states. While these estimates can at best be tentative, they will highlight the fact that the impact is differential across states and these differences would have to be taken into account in designing the proposed assignment of tax powers between the centre and the states.

Suggested Citation

  • R. Kavita Rao, 2008. "Goods and Services Tax for India," Macroeconomics Working Papers 22976, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:macroe:22976
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    Cited by:

    1. M. Govinda Rao & Sen, Tapas Kumar & Jena, Pratap R., 2008. "Issues before the thirteenth finance commission," Working Papers 08/55, National Institute of Public Finance and Policy.
    2. Sacchidananda Mukherjee, 2015. "Present State of Goods and Services Tax (GST) Reform in India," Working Papers id:7532, eSocialSciences.
    3. D K Srivastava & C Bhujanga Rao, 2010. "Reforming Indirect Taxes in India : Role of Environmental Taxes," Microeconomics Working Papers 23063, East Asian Bureau of Economic Research.
    4. M. Govinda Rao & Richard M. Bird, 2011. "Coping with Change: The Need to Restructure Urban Governance and Finance in India," IMFG Papers 04, University of Toronto, Institute on Municipal Finance and Governance.
    5. Richard.M. Bird & M. Govinda Rao, 2010. "Urban Governance and Finance in India," Working Papers id:2495, eSocialSciences.
    6. Frederico Gil Sander & Saurabh Shome & Smriti Seth & Jaba Misra, 2015. "India Development Update, October 2015," World Bank Other Operational Studies 22894, The World Bank.
    7. D K Srivastava & C Bhujanga Rao, 2010. "Reforming Indirect Taxes in India: Role of Environmental Taxes," Working Papers 2010-050, Madras School of Economics,Chennai,India.
    8. Rao, R. Kavita & Tandon, Suranjali & Mukherjee, Sacchidananda, 2016. "Corporate Tax: A brief assessment of some exemptions," Working Papers 16/165, National Institute of Public Finance and Policy.

    More about this item

    Keywords

    India; Indirect tax; VAT; empowered committee;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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