The Revenue Productivity of India’s Subnational VAT

Astha Sen and Sally Wallace

National Tax Journal, 2022, vol. 75, issue 4, 711 - 729

Abstract: Skepticism exists regarding the revenue potential of a subnational value-added tax (VAT). India is one of only three countries to embrace a subnational VAT, and it did so between 2003 and 2008. We analyze the impact of this historic policy reform on revenue productivity and find that implementation of the tax yields a 13 percent increase in sales tax revenue for India’s more developed states. This analysis is unique in providing empirical evidence of a revenue impact of a major tax policy reform for a subset of subnational governments in a developing country.

Date: 2022
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