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

Sacchidananda Mukherjee

Working Papers from 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.

Keywords: Revenue Uncertainty; Inter-Governmental Fiscal Transfers; Goods and Ser-vices Tax (GST); State Finances; India. (search for similar items in EconPapers)
Pages: 27
Date: 2019-02
Note: Working Paper 255, 2019
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Inter-governmental Fiscal Transfers in the Presence of Revenue Uncertainty: The Case of Goods and Services Tax (GST) in India (2020)
Working Paper: Inter-Governmental Fiscal Transfers in the Presence of Revenue Uncertainty: The Case of Goods and Services Tax (GST) in India (2019)
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