Evaluate the performance of States in augmenting their own tax revenues since Goods and Service Tax (GST) implementation. What lessons can be drawn for future fiscal devolution frameworks?
Kartavya Desk Staff
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Q5. Evaluate the performance of States in augmenting their own tax revenues since Goods and Service Tax (GST) implementation. What lessons can be drawn for future fiscal devolution frameworks? (15 M)
Difficulty Level: Medium
Reference: TH
Why the question Amidst rising State demands for higher central tax shares post-GST and fresh RBI data on uneven tax mobilisation, this question explores contemporary debates in fiscal federalism. Key Demand of the question The question requires an evaluation of States’ performance in improving their own tax revenues post-GST, analysis of the challenges faced, and extraction of key lessons for reshaping future fiscal devolution mechanisms. Structure of the Answer: Introduction Mention the transformation in fiscal relations brought by GST and the limited room left for States to independently raise taxes. Body Positive aspects: Mention growth in States’ tax-to-GSDP ratio, tech-driven reforms, and non-GST revenue mobilisation. Challenges: Discuss fiscal centralisation, uneven gains, delayed compensations, and administrative bottlenecks. Lessons for future devolution: Suggest dynamic devolution formulas, incentive-based transfers, reform of GST Council, and promotion of innovative tax mechanisms by States. Conclusion Conclude with a forward-looking note on crafting a balanced fiscal ecosystem that empowers States while preserving national coherence.
Why the question Amidst rising State demands for higher central tax shares post-GST and fresh RBI data on uneven tax mobilisation, this question explores contemporary debates in fiscal federalism.
Key Demand of the question The question requires an evaluation of States’ performance in improving their own tax revenues post-GST, analysis of the challenges faced, and extraction of key lessons for reshaping future fiscal devolution mechanisms.
Structure of the Answer:
Introduction Mention the transformation in fiscal relations brought by GST and the limited room left for States to independently raise taxes.
• Positive aspects: Mention growth in States’ tax-to-GSDP ratio, tech-driven reforms, and non-GST revenue mobilisation.
• Challenges: Discuss fiscal centralisation, uneven gains, delayed compensations, and administrative bottlenecks.
• Lessons for future devolution: Suggest dynamic devolution formulas, incentive-based transfers, reform of GST Council, and promotion of innovative tax mechanisms by States.
Conclusion Conclude with a forward-looking note on crafting a balanced fiscal ecosystem that empowers States while preserving national coherence.