An autonomous research institute under the Ministry of Finance


Tax Revenue Efficiency of Indian States: The case of Stamp Duty and Registration Fees

Publication date

Aug, 2019


NIPFP Working Paper No. 278


A. Sri Hari Nayudu


The Federal structure of India divided taxation powers between Union government and state government on certain principles. But, due to the goods and service tax (GST) implementation, states have lost jurisdiction over many taxes, since many state taxes were subsumed into GST. The extent of revenue losses to states due to subsuming certain taxes is not clear. On the other hand, the revenue situation of the states has not improved sufficiently. Despite of states tax efforts, improvement in own tax revenues are marginal. Under this back ground, states need to focus on the other existing taxes to improve its own tax revenues. The major revenue yielding taxes to states in the post GST regime are excise tax and stamp duty and registration fees.  This study attempts to measure tax capacity and tax effort of stamp duty and registration fee for 16 major Indian states from 2001 to 2014 using stochastic frontier analysis. It is found that Bihar is operating at high efficient levels with efficiency and Odisha and Jharkhand are operating with low efficiency. State government’s needs to focus on the relevant stamp duty policy changes and potential determinants of the model, which will help them improve their efficiency. The gap between predicted tax revenue and frontier tax revenue is more the case of Gujrat, Rajasthan, Tamil Nadu, Punjab and West Bengal. 
JEL Classification Codes: H21, H25, H71, H73
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