Goods and Services Tax for India

Indirect taxes on goods and services at the state level constitute 85 percent of own tax revenue of the state governments of which sales tax alone accounts for 61 percent. A change in regime in recent times from cascading types sales taxes to taxes based on input-tax credit within taxation of goods, as well as the adoption of a uniform rates of tax, has resulted in buoyant revenues. However, the reform agenda is far from complete. The proposed GST regime constitutes the next step towards comprehensive reforms of indirect taxes in India. It would be the final step or a step in the right direction, depending on how the country chooses to define the constituents of this new regime. Decisions on the design of the proposed tax are not yet in the public domain. In this context, the objective of this paper is twofold : First, to identify the likely form of the proposed tax and the contentious issues that need a resolution before the tax can be implemented effectively. Second, given the importance of indirect taxes in the portfolio of the states, since any change would not affect all states uniformly, an attempt would be made to project the likely impact of one particular design of GST on states. While these estimates can at best be tentative, they will highlight the fact that the impact is differential across states and these differences would have to be taken into account in designing the proposed assignment of tax powers between the centre and the states.India, Indirect tax, VAT, empowered committee

Tax breaks for the small scale sector: An appraisal.

Small scale sector ; Taxation

Time-series properties of state-level public expenditure.

Public expenditure reform must be underpinned by some understanding of the time-series properties of public expenditure. This paper examines the univariate properties of aggregate revenue expenditure at the level of State governments in India over the period 1974-98 for three states: Punjab, Haryana and Maharashtra. The empirical exercise is performed on the logarithmic transformation of aggregate revenue expenditure in terms of nominal (rather than ex post real) expenditure, not normalised to State Domestic Product, for reasons justified in the paper, and is confined to the aggregate for lack of a breakdown of the series by economic classification. The data are adjusted for notional entries and other distortionary budgetary practices. There is trend stationarity in Punjab and Haryana, with a deterministic trend growth rate of 16-17 per cent, and clear evidence thereby of fiscal smoothing in the presence of periodic upward shocks of Pay Commission or other origin. In Maharashtra by contrast, aggregate expenditure carries a unit root, with no deterministic trend, and no drift term; expenditure shocks of other than Pay Commission origin appear to have been enabled with no corresponding smoothing, but there is sharp and concurrent smoothing at the time of the Pay Commission shocks, such that aggregate expenditure does not show a spike. The issue of whether the fiscal smoothing in each case was unproductive or productive remains unrevealed in the aggregate figures.

Raising the tax ratio by reining in the "Tax-Breaks": An agenda for action.

Taxation

Tax System Reform in India

Many developing countries have embarked on tax reforms in recent years. Such reforms were motivated both by local factors as well as by rapid internationalization of economic activities. The need to correct fiscal imbalances and the transition from a centralized plan to a market economy were the important local factors hastening tax reforms. Difficulties in compressing expenditures necessitated that tax system reform take an important role in fiscal adjustment strategy. The transition from plan to market required the substitution of administered prices with market determined prices, the replacement of physical controls with financial controls, and the substitution of public enterprise profits with tax revenues. The Indian tax system too had to be reformed in response to changes in development strategy. In the initial years, tax policy was used as an instrument to achieve a variety of diverse goals which included increasing the level of saving and correcting for inequalities arising from an oligopolistic market structure created by a centralized planning regime, including a licensing system, exchange control, and administered prices (Bagchi and Nayak 1994). While the history of taxation in India is peppered with efforts for tax reform, especially in the form of various expert committees, the fiscal crisis of 1991 provided the first major window of opportunity for a serious rethink, followed by action. This paper analyzes both the structure and the operations of the Indian tax system. The first section discusses the evolution of the Indian tax system and tax collections and the impact of historical and institutional factors in shaping Indian tax policy. Next, we provide a critical analysis of some key features of the tax regime and its reform options. An analysis of the observed trends in tax revenue is presented in the following section, highlighting the possible efficiency and equity implications of the tax system. The final section pulls together the various suggestions for consolidation of tax reforms in India

Administration of GST: Can we Continue with Present Structures?

With some progress in the design of Goods and Services Tax (GST), there is an emerging need to explore the options for administering the new tax regime. This paper explores various options for GST administration

Determinants of Registration of Unincorporated Enterprises under State Value Added Tax Act in India

Unincorporated enterprises often bypass formal regulations in general and taxation in particular. Bringing unincorporated enterprises under taxation system is a challenge often faced by tax administrators and it is in this regard the present study explores the factors which influence decision of unincorporated enterprises to get registered with State Value Added Tax (VAT)/ sales tax authority. This analysis is limited to the decision regarding registration. It is not necessary that enterprises which are registered will pay taxes and/or file return- however; the process of registration does provide some information to the tax department for follow up. The study throws up some interesting results for policy makers and tax administrators

Administration of GST: Can we Continue with Present Structures?

With some progress in the design of Goods and Services Tax (GST), there is an emerging need to explore the options for administering the new tax regime. This paper explores various options for GST administration