How Did Transition to GST Regime Affect Inflation in India?

Rudrani Bhattacharya ()
Additional contact information
Rudrani Bhattacharya: National Institute of Public Finance and Policy

A chapter in India's Public Finance and Policy Challenges in the 2020s, 2025, pp 177-197 from Springer

Abstract: Abstract Indian indirect tax regime shifted from multiple tax system to a uniform rate value added Goods and Services tax regime on 1 July 2017. There have been long-standing public debate on probable costs and benefits of GST regime replacing long-existed multiple tax regime. In the cost side, while producers and sellers may have to incur some fixed costs at the beginning of the regime to comply with the government rates and structures, the shift to GST system is expected to reduce prices via reducing cascading effects of multiple tax layers and increasing efficiency of the logistics and distribution system. Empirical literature on both advanced and developing economies suggest mixed impact of adopting GST system on inflation. This paper contributes to this literature by investigating effects of GST system on CPI, WPI inflation and their major components namely food and core inflation in India. Applying intervention method in a multivariate framework, controlling for other macroeconomic shocks and duration of intervention endogenously identified using structural breaks in inflation series, we find a positive effect of GST on headline inflation in India via inflationary impact on retail food prices.

Keywords: GST; Inflation; Structural breaks; Intervention method; India (search for similar items in EconPapers)
JEL-codes: C54 E31 E65 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-96-2860-5_10

Ordering information: This item can be ordered from
http://www.springer.com/9789819628605

DOI: 10.1007/978-981-96-2860-5_10

Access Statistics for this chapter

More chapters in India Studies in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().