Revenue Implications of GST Rates Restructuring in India: An Analysis

Sacchidananda Mukherjee

Working Papers from National Institute of Public Finance and Policy

Abstract: Keeping in mind the revenue needs of the governments, we assess the revenue implications of restructuring GST rates. The study builds six alternative scenarios based on various assumptions about the tax rate-wise distribution of taxable value and tax liabilities. Unlike previous studies on RNRs, the present study relies on aggregate tax information as captured through GSTR-1. In line with data available from the GSTN database, the study considers only domestic component of GST collection (i.e., CGST, SGST and IGST- domestic component). Our study estimates merger of 12 and 18 per cent tax slabs into 15 per cent and estimates tax rates required to achieve revenue neutrality. The results show that merging 12 per cent and 18 per cent tax rates into any tax rate lower than 18 per cent may result in revenue loss. Based on various estimates, the study proposes that to compensate the revenue loss, the GST council may consider three rate structure of GST by adopting 8 per cent, 15 per cent and 30 per cent and it may help achieve revenue neutrality. In all scenarios, we assume that status quo in special rates will be maintained.

Keywords: Goods and Services Tax; Tax Base; Revenue Neutral Rates (RNRs); GST Rate Structure; Tax Buoyancy (search for similar items in EconPapers)
JEL-codes: E62 H20 H26 (search for similar items in EconPapers)
Pages: 30
Date: 2021-11
New Economics Papers: this item is included in nep-mac and nep-pbe
Note: Working Paper 358, 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:21/358

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