ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

GSTSubscribe to GST

Is the 14% Revenue Guarantee to States Justified?

When the goods and services tax was introduced in July 2017, states were given a revenue guarantee of 14% per annum on their GST revenue over the base year 2015–16. Using data on revenue from subsumed taxes for 24 states and two union territories during the years 2012–16 preceding the GST, it is investigated whether the 14% revenue guarantee was justified. Not many states had a growth rate of subsumed taxes higher than 14% pre-GST, with most of them falling in the 5%–12% growth rate band. It is estimated that the potential savings in the compensation payment due from 1 July 2017 to 31 March 2020—if the states were assured of compensation at their respective historically achieved tax buoyancy—would have ranged between ₹ 1.8 lakh crore and ₹ 2.12 lakh crore.

The State of State Finances

Only a generous award by the Fifteenth Finance Commission can restore fiscal balance. */ */

Fifteenth Finance Commission Award for 2020–21

The first report of the Fifteenth Finance Commission has allayed many fears that arose after the notification of the terms of reference of the commission. The main report for the period 2021–22 to 2025–26 will have to factor in the devastating impact of COVID-19 on the economy and provide adequate fiscal space to the states for socio-economic response and recovery.

The Impasse over GST Compensation

The GST council should arrive at a consensus to compensate the states for revenue shortfalls.

Small Businesses, Big Reform

This paper draws evidences from field surveys to bring out the impact of the goods and services tax on the micro, small and medium enterprises by exploring issues of coverage, rate, selection and exemption of taxation, and subsequently, its effect on the competitiveness and viability of these businesses. The coping mechanisms the units undertook to tide over the crisis they faced as well as the GST Council responses are also discussed.

Indian Fiscal Federalism at the Crossroads

The abolition of the Planning Commission, the creation of the NITI Aayog, the constitutional amendment to introduce the goods and services tax, the establishment of the goods and services tax council, and the historically high tax devolution to the states based on the Fourteenth Finance Commission have changed the union–state fiscal relations fundamentally. The changing contours of union–state fiscal relations discussed in the context of the release of a recent book Indian Fiscal Federalism by Y V Reddy and G R Reddy are presented here.

Betting on Animal Spirits

Budget 2019–20 is more concerned with getting private finance for investment, especially in infrastructure, rather than with finding ways to finance much needed state action to address slowing growth and welfare shortfalls. However, even that stance does not free it from the neo-liberal fiscal bind it finds itself in.

A Post-Keynesian Approach to Understanding the Black Economy

Macroeconomics of the Black Economy by Saumen Chattopadhyay, Hyderabad: Orient Blackswan, 2018; pp xx + 276, ₹ 795.

Incongruence between Announcements and Allocations

A scrutiny of the Indian economy and the state of public finances reveals that while there are a few areas of improvement under the current government, the economy remains fragile and, worryingly, the situation has worsened in some other respects. It was hoped that the Union Budget 2018–19 would take measures to address some of these concerns but these expectations have been belied. Budget 2018–19, possibly with an eye on elections, has made grand announcements instead of taking hard decisions and making adequate allocations towards key sectors of the economy.

Notes from India’s State Border Highways: Changing Rules, Institutional Corruption and Hoping for Too Much from GST

This essay looks at institutionalised corruption and its effect on Indian roadways, especially the Golden Quadrilateral. Despite higher speeds, delays of crossing states borders nullifies gains from speed. Will the goods and services tax change things?

Erroneous Understanding of Macroeconomic Challenges

The government chose not to adequately expand budgetary expenditure to stimulate aggregate demand due to an erroneous understanding of India’s macroeconomic challenges. It relies heavily on imagined fiscal gains from demonetisation and the introduction of the Goods and Services Tax regime. The Union Budget 2017–18 was a missed opportunity for the government and our economy.

‘Fiscal Federalism’ in India since 1991

The “reforms” in 1991 laid out a new trajectory in which federalism was dichotomised into two parts—political and fiscal. The fiscal was privileged and used to undermine the political. Fiscal federalism in India since 1991 rests on the contradictions generated by the theoretical infirmities of the sound finance paradigm along with a concerted undermining of federal provisions. This political drive is in keeping with the agenda since 1991, eroding the relative autonomy of the state to turn it into a facilitator of a macroeconomic expansion process in which the wage–surplus distribution becomes more and more favourable to capital.
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