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The political economy of India's transition to Goods and Services Tax

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  • Sharma, Chanchal Kumar

Abstract

What kept the Goods and Services Tax (GST) from becoming a reality in India for a quarter of a century after the adoption of the structural adjustment programme in 1991? What made it possible in 2016? To what extent the Indian model of GST reflects a compromise between the need to keep fiscal federalism intact and to respond to a more global economic impera-tive? To what extent India's transition to a concurrent dual GST has brought about a change in the principles, rules, frameworks, and institutions guiding intergovernmental fiscal interactions? This paper investigates these issues and shows that the shifts in the indirect tax regime in India since independence have taken place within the structural context of constitutional rules, the economic policy paradigm and political dynamics. Party congruence after 2014 helped to facilitate the introduction of the GST, but the shape thereof was strongly marked by path-dependent logics and the role of state governments as institutional veto players. In addition, the paper examines the ways in which India's transition to a concurrent dual GST has brought about a fundamental change in the principles, rules, frameworks, and institutions guiding intergovernmental fiscal interactions.

Suggested Citation

  • Sharma, Chanchal Kumar, 2021. "The political economy of India's transition to Goods and Services Tax," GIGA Working Papers 325, GIGA German Institute of Global and Area Studies.
    • Handle: RePEc:zbw:gigawp:325
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    References listed on IDEAS

    as
    1. Singh, Nirvikar & Rao, Govinda, 2006. "Political Economy of Federalism in India," OUP Catalogue, Oxford University Press, number 9780195686937.
    2. M. Govinda Rao & Nirvikar Singh, 2007. "The Political Economy of India's Fiscal Federal System and its Reform," Publius: The Journal of Federalism, CSF Associates Inc., vol. 37(1), pages 26-44, Winter.
    3. Bird,Richard M. & Vaillancourt,François (ed.), 2008. "Fiscal Decentralization in Developing Countries," Cambridge Books, Cambridge University Press, number 9780521101585, September.
    4. Bird,Richard & Gendron,Pierre-Pascal, 2011. "The VAT in Developing and Transitional Countries," Cambridge Books, Cambridge University Press, number 9781107401440, September.
    5. repec:npf:wpaper:20 is not listed on IDEAS
    6. Rangarajan, C. & Srivastava, D.K., 2004. "Fiscal transfer in Australia: Review and relevance to India," Working Papers 04/20, National Institute of Public Finance and Policy.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    India; fiscal federalism; indirect tax reforms; GST; intergovernmental relations; fiscal autonomy;
    All these keywords.

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