| By: |
Ajitava Raychaudhuri;
Sudip Kumar Sinha;
Poulomi Roy |
| Abstract: |
The Value Added Tax (VAT) was introduced in India in place of Sales Tax,
taking effect in April 1, 2005. These taxes are in the domain of different
state governments within the country's federal set up. Although VAT is widely
acclaimed to be a better system than the sales tax on grounds of efficiency in
tax collection, no study has been undertaken to assess the impact of this
reform measure on social equity. This paper addresses this need with the use
of concentration curves and consumption dominance curves of various orders.
The simulations were done on two major states in India, namely Maharashtra and
West Bengal, using National Sample Survey Unit Level data for the 55th round.
The results show that the reform is largely pro-poor, although there are ways
to improve it with respect to some items predominantly consumed by the
relatively poorer groups. |
| Keywords: |
Value added tax, Marginal tax reform, public distribution system, concentration curve, Lorenz curve, marginal efficiency cost of funds, consumption dominance |
| JEL: |
D12 D63 H21 H22 H71 I32 |
| Date: |
2007 |
| URL: |
http://d.repec.org/n?u=RePEc:lvl:pmmacr:2007-18&r=pub |