An Analysis of the Impact of GST on States’ Indirect Tax Revenue and on Economic Formalization with Special Focus on West Bengal

Hari Krishna Dwivedi, Achin Chakraborty and Sudip Kumar Sinha ()
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Hari Krishna Dwivedi: Office of Chief Secretary, Government of West Bengal
Achin Chakraborty: Institute of Development Studies Kolkata
Sudip Kumar Sinha: Finance Department, Government of West Bengal

A chapter in Risks and Resilience of Emerging Economies, 2023, pp 21-46 from Springer

Abstract: Abstract Goods and Services Tax (GST) is the most significant reform in the history of indirect taxation in India. It was introduced in India on 1st July, 2017. After the implementation of GST, a large part of the states’ revenues from indirect taxes got subsumed under GST. In this paper, we have carried out an inter-state comparison of the impact of GST on the indirect tax revenue of the General Category States (GCS) in India with special reference to West Bengal. Indicators such as Tax to GSDP ratio & Tax Buoyancy have been used to measure tax revenue performance in pre-GST and post-GST era for each GCS. In addition, we have carried out a comparative analysis of the extent of dependency on GST compensation among the GCS and found that for Punjab, Chhattisgarh, Karnataka, Gujarat, Odisha, Haryana, Tamil Nadu, Madhya Pradesh and Maharashtra, the dependency is not only high but also strictly increasing at an increasing rate. Further, we have examined whether GST has benefitted net consumption states because GST is designed to be a consumption-based tax, not an origin-based tax. Besides, we have estimated the impact of COVID-19 on the GST collections of the states taken together and found that GST collection of all states has declined in the first quarter of FY 2020–2021 over the first quarter of the previous fiscal year. Further, we have examined the impact of GST on formalization of the economy of GCS. We have analysed indicators such as the change in number of Micro, Small and Medium Enterprises (MSMEs) registrations and number of registered persons on payroll to assess the extent of formalization of economy of GCS.

Date: 2023
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DOI: 10.1007/978-981-99-4063-9_2

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