Abstract

Background/Objectives: 1. To study the impact of State VATs in Indian States. In the past, many attempts have been made. In all the studies, Sales Tax revenues collected from states have been used to assess the impact and found that impact is almost zero. In reality, the State Sales-tax revenues consist of revenues from VAT commodities, non VAT commodities, Surcharges, Turnover taxes and Central Sales Tax. Hence, an attempt is made in this paper to study the impact of State VATs after isolating revenues due to VAT commodities from the sales-tax revenues of the states after deducting the revenues from non VAT commodities for the period from 1995-96 to 2014-15 for 22 major states of India as many of these States have been collecting substantial and huge revenues from Non-VAT commodities. 2. Also, it is proposed to estimate the expected revenues and the Revenue Neutral Rate (RNR) under Goods and Services Tax (GST).

Statistical Analysis: Basic statistical tools Viz. Annual Average Growth Rate (AAGR), Buoyancy Co-efficient and Co-efficient of Variation (C.V.) have been calculated for both the pre and post VAT periods separately for 22 major states of India

Findings: The performance of VAT in most of the States is highly impressive and during the last five years from 2011-12 to 2014-15, these States have posted an excellent growth of 21%. This successful gain in performance of State VATs may be taken as a green signal for the transition to the Introduction of Goods and Services Tax (GST) and an attempt is made in this paper to estimate the expected revenues and the Revenue Neutral Rate (RNR) under GST. A RNR of 8% is found to be sufficient for revenue generation for States.

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