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Inter-Governmental Fiscal Transfers in the Presence of Revenue Uncertainty: The Case of Goods and Services Tax (GST) in India

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  • Mukherjee, Sacchidananda

    (National Institute of Public Finance and Policy)

Abstract

A comprehensive multistage Value Added Tax (VAT) system, viz., Goods and Ser-vices Tax (GST), is introduced in India since 1 July 2017. GST encompasses various taxes from Union and State indirect tax bases and it is a dual VAT system with concurrent taxa-tion power to Union and State governments. It was envisaged that removal cascading of taxes and enshrining destination based consumption tax system under GST will encour-age investment and improve ease-of-doing business in India. Though it is not right time to comment on success or failure of Indian GST system unless the tax system stabilizes, so far revenue mobilization from GST is not encouraging. The shortfall in GST collection has been acknowledged in the `Medium Term Fiscal Policy cum Fiscal Policy Strategy State-ment' of the Union Budget 2019-20. The genesis of revenue shortfall may be design and structural in nature and/or compliance and tax administration related. However, the un-certainty surrounding GST revenue collection is an issue which needs an in-depth assess-ment for fiscal management of Union and State governments. The impact of revenue un-certainty will not be restricted to Union finances alone; it will spill over to state finances through inter-governmental fiscal transfers. Therefore, depending on seriousness of the uncertainties associated with GST revenue collection, devising an inter-governmental fis-cal transfer framework may be a challenging task for the Fifteenth Finance Commission. Given the information available in the public domain, this paper attempts to explore pos-sible causes of revenue shortfall and assess possible impacts of revenue shortfall on Union and State finances.

Suggested Citation

  • Mukherjee, Sacchidananda, 2019. "Inter-Governmental Fiscal Transfers in the Presence of Revenue Uncertainty: The Case of Goods and Services Tax (GST) in India," Working Papers 19/255, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:19/255
    Note: Working Paper 255, 2019
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    References listed on IDEAS

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    1. Anand, Mukesh Kumar & Chakraborty, Rahul, 2019. "Public Expenditure on Old-Age Income Support in India: Largesse for a Few, Illusory for Most," Working Papers 19/253, National Institute of Public Finance and Policy.
    2. Mukherjee, Sacchidandanda, 2020. "Possible Impact of Withdrawal of GST Compensation Post GST Compensation Period on Indian State Finances," Working Papers 20/291, National Institute of Public Finance and Policy.
    3. Rao,R. Kavita & Mukherjee,Sacchidananda, 2019. "Evolution of Goods and Services Tax in India," Cambridge Books, Cambridge University Press, number 9781108473965.
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    Cited by:

    1. Sacchidananda Mukherjee, 2020. "Estimation and Projection of Petroleum Demand and Tax Collection from Petroleum Sector in India," Journal of Infrastructure Development, India Development Foundation, vol. 12(1), pages 39-68, June.
    2. Pratik Dutta & Mehtab Hans & Mayank Mishra & Ila Patnaik & Prasanth Regy & Shubho Roy & Sanhita Sapatnekar & Ajay Shah & Ashok Pal Singh & Somasekhar Sundaresan, 2019. "How to Modernise the Working of Courts and Tribunals in India," Working Papers id:13028, eSocialSciences.
    3. Chakraborty, Lekha & Nayyar, Veena & Jain, Komal, 2019. "The Political Economy of Gender Budgeting: Empirical Evidence from India," Working Papers 19/256, National Institute of Public Finance and Policy.
    4. Mukherjee, Sacchidananda, 2019. "State of Public Finance and Fiscal Management in India during 2001-16," Working Papers 19/265, National Institute of Public Finance and Policy.
    5. Amarnath, H.K. & Singh, Alka, 2019. "Impact of Changes in Fiscal Federalism and Fourteenth Finance Commission Recommendations: Scenarios on States Autonomy and Social Sector Priorities," Working Papers 19/257, National Institute of Public Finance and Policy.
    6. Pankaj Dikshit & M. P. Gupta & Arpan Kumar Kar & B. Chandra, 2022. "Taxation transformation of businesses enabled by information systems: an empirical study of Goods and Services Tax implementation in India," SN Business & Economics, Springer, vol. 2(9), pages 1-26, September.
    7. Mukherjee, Sacchidananda, 2019. "Whether States have Capacity to Sustain Projected Growth in GST Collection during the Compensation Period?," Working Papers 19/275, National Institute of Public Finance and Policy.
    8. Bose, Sukanya & Noopur, A. & Nayudu, Sri Hari, 2022. "Intergovernmental Fiscal transfers and Expenditure on Education in India: State level analysis, 2005 to 2020," Working Papers 22/377, National Institute of Public Finance and Policy.

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