Role of ICT, Governance Quality in Indirect Tax Revenue Productivity: A Comparative Analysis of Two Recent Indirect Tax Regimes in Indian States

Abstract

The study explores the determinants of indirect tax mobilization across various groups of Indian states based on their major, minor categories and more and less industrialized attributes. It observes a strongly positive but differential impact of per capita RGSDP on own tax revenue efforts of various state groups. Information and Communication Technology use is only helping major less and minor more producer states in augmenting their tax revenues, whereas it results in decreased revenues for major more and minor less producing state groups including all the states in a group. This implies use of Information and Communication Technology has been less effective for most Indian states in augmenting their tax revenues. The governance quality results in loss of tax revenues in major and minor less producer states, while it has no effect on major more producer including all minor and all states together. This implies a weak role of governance in taxation. We observe differential impact of tax regimes for different state panels, which has significant policy relevance. JEL Classification: H11, H21, H27, H77