Indirect tax revenue - an assessment of central V/S state government

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Tax collection in India is primarily done under the category of direct and indirect sources of tax by three tier system that is, the central government, the state government and the local government.

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International Journal of Management (IJM) Volume 7, Issue 3, March-April 2016, pp. 12-17, Article ID: IJM_07_03_002 Available online at http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=3 Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com ISSN Print: 0976-6502 and ISSN Online: 0976-6510 © IAEME Publication INDIRECT TAX REVENUE - AN ASSESSMENT OF CENTRAL V/S STATE GOVERNMENT Vineet Singh and Abhinna Srivastava Assistant Professor, Department of Commerce, Guru Ghasidas Vishwavidyalaya, Bilaspur, Chhattisgarh ABSTRACT Tax collection in India is primarily done under the category of direct and indirect sources of tax by three tier system that is, the central government, the state government and the local government. However, the concentrate of present study is on the assessment of indirect tax revenues by central and state government. In addition to this certain statistical tools are also applied in order to present a livelier picture of tax collection by central government and state government through indirect sources. Key words: Central Government, State Government, Indirect Tax Cite this Article: Vineet Singh and Abhinna Srivastava. Indirect Tax Revenue - An Assessment of Central V/S State Government. International Journal of Management, 7(3), 2016, pp. 12-17. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=3 INTRODUCTION The word ‘Tax’ is derived from a Latin word ‘Taxo’ which basically means “rate”. Tax may be defined as a financial charge which is imposed by central government, state government or local government on an individual or on a legal entity, the fabrication of which is generally punishable by law. There are few countries around the world which impose no tax at all such as Saudi Arabia and United Arab Emirates. Taxes are levied in monetary terms or as its labour equivalent, the goal of which is to afford funds for meeting various public expenditures such as law, defence, roads, dams, bridges, as well as to finance various public welfare services like education, health etc. In India the imposition of taxes are administered by the Income Tax Act, 1961. In India taxes are collected under two categories i.e. direct tax and indirect tax. An indirect tax may be defined as a tax which can be shifted by the taxpayer to someone else. This tax shifting can be done by way of increasing the price of a product, as a result of which consumers are bound to pay more for the same product. Major indirect taxes levied in India are enumerated as follows: http://www.iaeme.com/IJM/index.asp 12 editor@iaeme.com
Indirect Tax Revenue - An Assessment of Central V/S State Government  Custom Duty: Custom Act was formed in 1962 under which Custom Duty is imposed on the goods imported in India or exported from India at a specified rate.  Sales Tax: Sales Tax is imposed on the purchase and sale of a particular commodity within the country and is imposed under both, Central Government (Central Sales Tax) and State Government (Sales Tax).  Value Added Tax (VAT): Most of States, in India have supplemented sales tax with Value Added Tax (VAT) which is applied on each stage of sale.  Central Excise Duty: It is a tax which is charged under Central Excise Act, 1944 and Central Excise Tariff Act, 1985 on such excisable goods which are produced in India and are meant for domestic consumption.  Service Tax: Service Tax is required to be paid under the provisions of Finance Act, 1994 by all the service providers in India except Jammu and Kashmir.  Securities Transaction Tax (STT): As the name suggest Securities Transaction Tax is imposed on all the transactions done on stock exchanges. OBJECTIVES OF THE STUDY  To determine the amount of indirect tax collected by central government during the period 2002-03 to 2011-12.  To ascertain the amount of indirect tax collected by state government during the period 2002-03 to 2011-12.  To find out the percentage increase in indirect tax collected by central government in each year from 2002-03 to 2011-12.  To examine the percentage increase in indirect tax collected by state government in each year from 2002-03 to 2011-12.  To test whether there is any significant difference between indirect tax collected by central government and state government during 2002-03 to 2011-12. RESEARCH METHODOLOGY The study is based mainly on secondary data and the related information in this regard has been collected from a number of sources like journals, websites, articles etc. The analysis is carried out through a variety of statistical tools such as percentage, average, t-test etc. ANALYSIS AND INTERPRETATION Indirect tax collected by central and state government has been scrutinized with the help of following table and graphical representation followed by t-test. Table 1 Indirect Tax Revenue of CeTntral Government Year Indirect Tax Revenue (Rs. In Crores) % increase 2002-03 133181 ---- 2003-04 149258 12.07 2004-05 172111 15.31 2005-06 202223 17.50 2006-07 243252 20.29 2007-08 280904 15.48 2008-09 271445 -3.37 2009-10 247041 -8.99 2010-11 340888 37.99 2011-12 399789 17.28 Average 244009.2 12.36 http://www.iaeme.com/IJM/index.asp 13 editor@iaeme.com
Vineet Singh and Abhinna Srivastava Figure 1 Indirect Tax Revenue of Central Government Indirect Tax Revenue of Central Government 450000 50 400000 40 350000 30 300000 250000 20 200000 10 150000 0 100000 50000 -10 0 -20 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Indirect Tax Revenue (Rs. In Crores) % increase Table 1 and figure 1 demonstrate the indirect tax revenue collected by central government from 2002-03 to 2011-12. The above table and figure also illustrate the percentage increase in indirect tax revenue during the study period. Indirect tax revenue collected by central government stood at an average of Rs. 244009.2 crores during the study period. Indirect tax revenue collected by central government has shown an increasing trend during the study period except 2008-09 and 2009-10 where the indirect tax revenue has decreased from previous year balances. Indirect tax revenue has increased from 133181 crores (in 2002-03) to 399789 crores in (2011-12) i.e. more than three times. It was in the year 2010-11 when the indirect tax revenue has shown maximum increase of 37.99 % whereas the minimum increase in indirect tax revenue was observed in the year 2003-04 i.e. 12.07 %. Table 2 Indirect Tax Revenue of State Government Year Indirect Tax Revenue (Rs. In Crores) % increase 2002-03 118920 ---- 2003-04 133654 12.39 2004-05 157042 17.50 2005-06 180235 14.77 2006-07 212932 18.14 2007-08 240940 13.15 2008-09 276873 14.91 2009-10 315856 14.08 2010-11 394932 25.04 2011-12 462212 17.04 Average 249359.6 14.70 http://www.iaeme.com/IJM/index.asp 14 editor@iaeme.com
Indirect Tax Revenue - An Assessment of Central V/S State Government Figure 2 Indirect Tax Revenue of State Government Indirect Tax Revenue of State Government 500000 30 450000 25 400000 350000 20 300000 250000 15 200000 10 150000 100000 5 50000 0 0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Indirect Tax Revenue (Rs. In Crores) % increase The above table and figure demonstrate the indirect tax revenue collected by state government from 2002-03 to 2011-12. The above table and figure also illustrate the percentage increase in indirect tax revenue during the study period. Indirect tax revenue collected by state government stood at an average of Rs. 249359.6 crores during the study period. Indirect tax revenue collected by state government has shown an increasing trend during the entire study period. Indirect tax revenue has increased from 118920 crores (in 2002-03) to 462212 crores in (2011-12) i.e. more than 3.8 times. It was in the year 2010-11 when the indirect tax revenue has shown maximum increase of 25.04 % whereas the minimum increase in indirect tax revenue was observed in the year 2003-04 i.e. 12.39 %. Table 3 Indirect Tax Revenue: Central v/s State Government (Rs. in Crores) Year Indirect Tax Revenue (Central Govt.) Indirect Tax Revenue (State Govt.) 2002-03 133181 118920 2003-04 149258 133654 2004-05 172111 157042 2005-06 202223 180235 2006-07 243252 212932 2007-08 280904 240940 2008-09 271445 276873 2009-10 247041 315856 2010-11 340888 394932 2011-12 399789 462212 Average 244009.2 249359.6 http://www.iaeme.com/IJM/index.asp 15 editor@iaeme.com
Vineet Singh and Abhinna Srivastava Figure 3 Indirect Tax Revenue: Central v/s State Government (Rs. in Crores) InDirect Tax Revenue (Central v/s State Govt.) 500000 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 Indirect Tax Revenue (Central Govt.) (Rs. In Crores) Indirect Tax Revenue (State Govt.) (Rs. In Crores) Table 3 and figure 3 symbolize the amount of indirect tax revenue collected by central and state government separately from 2002-03 to 2011-12. The above data reveals that state government has an edge over central government with regard to indirect tax collection. Indirect tax revenue of state government stood at an average of Rs. 249359.6 crores whereas indirect tax revenue of central government stood at an average of Rs. 244009.2 crores. In addition the above figure also reveals that there has been a regular increase in the amount of indirect tax collected by state government during the study period whereas the central government has witnessed a decrease in indirect tax collection in the years 2008-09 and 2009-10. HYPOTHESIS TESTING ON INDIRECT TAX REVENUE COLLECTED BY CENTRAL GOVERNMENT AND STATE GOVERNMENT In order to test whether there is a significant difference between indirect tax revenue collected by central government and state government the following hypothesis is framed and tested through t-test at 95% confidence level: H0 There is no significant difference between indirect tax revenue collected by central government and state government. H1 There is a significant difference between indirect tax revenue collected by central government and state government. http://www.iaeme.com/IJM/index.asp 16 editor@iaeme.com
Indirect Tax Revenue - An Assessment of Central V/S State Government t-Test: Two-Sample Assuming Unequal Variances Indirect Tax Revenue (Central Indirect Tax Revenue (State Parameters Govt.) Govt.) Mean 244009.2 249359.6 Variance 7105853336 12975234516 Observations 10 10 Hypothesized Mean Difference 0 df 17 t Stat -0.119396785 P(T