वित्त मंत्रालय के तहत एक स्वायत्त अनुसंधान संस्थान

 

Revenue Implications of GST Rates Restructuring in India: An Analysis

Publication date

नव, 2021

Details

NIPFP Working Paper No. 358

Authors

Sacchidananda Mukherjee

Abstract

Keeping in mind the revenue needs of the governments, we assess the revenue implications of restructuring GST rates. The study builds six alternative scenarios based on various assumptions about the tax rate-wise distribution of taxable value and tax liabilities. Unlike previous studies on RNRs, the present study relies on aggregate tax information as captured through GSTR-1. In line with data available from the GSTN database, the study considers only domestic component of GST collection (i.e., CGST, SGST and IGST- domestic component). 
 
Our study estimates merger of 12 and 18 per cent tax slabs into 15 per cent and estimates tax rates required to achieve revenue neutrality. The results show that merging 12 per cent and 18 per cent tax rates into any tax rate lower than 18 per cent may result in revenue loss. Based on various estimates, the study proposes that to compensate the revenue loss, the GST council may consider three rate structure of GST by adopting 8 per cent, 15 per cent and 30 per cent and it may help achieve revenue neutrality. In all scenarios, we assume that status quo in special rates will be maintained.
 
Keywords: Goods and Services Tax, Tax Base, Revenue Neutral Rates (RNRs), GST Rate Structure, Tax Buoyancy.
JEL Codes: H20, E62, H26
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