Articles by Sacchidananda Mukherjee

The introduction of the goods and services tax has resulted in a subsummation of taxes like local body tax, which used to be collected by “local authorities.” Consolidation of tax base under the GST by including various taxes of union, state and local governments resulted in a single tax base. On the consolidated tax base, both union and state governments collect GST concurrently. Since the tax base of LBT is subsumed under the GST, the demand for compensation by the local authorities (including cantonment boards) is justified. Unless there is assignment of new tax handles to local authorities, it is perpetual revenue loss for them.

In India, states may be induced to mobilise revenue through alternative channels by the growing demand for public expenditure, limitations in expanding fiscal space, and the limited scope to deviate from the common harmonised tax system, the goods and services tax regime. An assessment of existing tax efficiency and strengthening the tax administration could be one such alternative. The efficiency of tax administration varies across states. Given tax capacity, measuring tax efficiency is important to identify states where enhancing tax efficiency is likely to raise revenue gains considerably.

This study analyses the impact of keeping crude petroleum, natural gas, motor spirit (gasoline/petrol), high-speed diesel (diesel), aviation turbine fuel and electricity out of the value-added tax scheme. Specifically, the paper finds that keeping these items out of the input tax credit mechanism (either partially or fully) would result in cascading. Through an input-output framework, this study proposes some alternatives to the proposed design of the Goods and Services Tax and assesses the implications for cascading and prices. It captures the degree of cascading across 48 sectors under different scenarios and explores alternative policy options to phase out under-recoveries of oil marketing companies on account of sales of diesel and petrol under the administered pricing mechanism.