Implications of Goods and Services Tax on Revenue Productivity of Northeastern States: An Empirical Analysis

Abstract

The adoption of Goods and Services Tax, popularly known as GST, is believed to unlock the strong revenue potential of the northeastern states in India. Being GST destination-based taxation, most of the northeastern states are collecting much more revenues as they are predominantly consuming states. With the phasing out of the Central Sales Tax from the state of origin to the consuming state, the tax collections for these states have seen a phenomenal increase. All the Northeastern states have gained higher revenues from State Goods and Services Tax (SGST), a component of GST representing taxes collected within the state. With a growing economy in the northeastern region, GST is likely to register a revenue boost in the future and would help in resource mobilization for the development of the region. The purpose of the study is to analyze the implication of GST on the revenue productivity of northeastern states via empirical analysis on data obtained from 8 Northeastern states of India from FY 2018-19 to FY 2022-23. The findings provide major, immediate, and minor benefits of GST implementation towards northeastern states which can be utilized by various researchers and policymakers for academic and administrative purposes. The outcome of the study reveals that the phasing out of “consumption-based taxation to destination-based taxation” and “elimination of cascading effect” had majorly benefited the Northeastern states.