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WP_255_2019.pdf (1.22 MB)
Download fileInter-Governmental Fiscal Transfers in the Presence of Revenue Uncertainty: The Case of Goods and Services Tax (GST) in India
A comprehensive multistage Value Added Tax (VAT) system, viz., Goods and
Services 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 taxation power to Union and State
governments. It was envisaged that removal cascading of taxes and
enshrining destination based consumption tax system under GST will
encourage 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 Statement’ 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 uncertainty surrounding GST
revenue collection is an issue which needs an in-depth assessment for
fiscal management of Union and State governments. The impact of revenue
uncertainty 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
fiscal 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 possible causes of revenue
shortfall and assess possible impacts of revenue shortfall on Union and
State finances.
Funding
National Institute of Public Finance and Policy (NIPFP), New Delhi, India.
History
Declaration of conflicts of interest
There is no conflict of interestCorresponding author email
sachs.mse@gmail.comLead author country
- India
Lead author job role
- Practitioner/Professional
Lead author institution
National Institute of Public Finance and Policy (NIPFP), New Delhi, India.Human subjects
- No
Ethis statement
No part of the paper is taken from any previouosly published studies.Comments
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