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The IUP Journal of Accounting Research and Audit Practices:

Impact of GST Implementation and Covid-19 on Tax Revenue of States in India

Article Details

Pub. Date	: October, 2023
Product Name	: The IUP Journal of Accounting Research and Audit Practices
Product Type	: Article
Product Code	: IJARAP021023
Author Name	: Charu Sharma and Shilpa Lodha
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 10

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Abstract

Goods and Services Tax (GST) completed its four years in July 2021. It was expected that by implementing GST in the country, the governments (Central and States) would be able to solve many tax-related problems such as tax evasion, cascading effect, increasing competition among states for inviting investment, and most importantly increasing states' tax revenue, more autonomy and expenditure. Has the imposition of GST in India impacted the tax revenue of states? Has the outbreak of Covid-19 pandemic impacted the GST of all the states and union territories? The paper deals with these specific questions constituting a sample of all states and some union territories for the period 2015 to 2021 categorized into pre-GST (2015-2017) and post-GST (2017-2021) period. The secondary data comprises average proportion of own tax revenue of states in their total revenue, and the data has been analyzed to find out whether imposition of GST has impacted the collection of own tax revenue of states, and whether the Covid-19 pandemic has impacted the collection of SGST and UTGST of states and union territories. The tools and techniques applied for testing the hypothesis are Wilcoxon Sign Rank Test, paired t-test and Kruskal-Wallis H-test. The findings reveal that imposition of GST has no significant impact on own tax revenue of states, but Covid-19 significantly impacted SGST and UTGST.

Description

Goods and Services Tax (GST) has replaced many indirect taxes in India. In 1954, GST was introduced for the first time in France. In 2000, for the first time, the idea of GST was initiated by the then BJP Government. An empowered committee was also formed headed by Asim Dasgupta (the then Finance Minister of West Bengal) to design the model of GST. GST has been effective in India since July 1, 2017, and is based on the principle of destination-based consumption taxation. It was introduced as the 101th Amendment Act, 2016, following the passage of the Constitution 122nd Bill Amendment. GST council was formed by Government of India to govern the matters relevant to GST. The council takes decision on the GST rate, exemption and thresholds, taxes to be subsumed and other matters. GSTC launched a dual GST mode that distributed powers to both Center and States to levy the tax concurrently. Since GST is a destination-based consumption tax, a sense of fear arose among manufacturing states because the states with higher consumption of goods and services would earn more than the manufacturing states. This became one of the reasons for the resistance to imposition of GST in India. To assure the various state governments regarding their revenue income, the GST council proposed to levy compensation cess in order to compensate the losses to the state governments arising due to imposition of GST in India.