Integrated Goods and Services Tax Apportion Between Centre and States: Kerala as a Case Study

Abstract

ABSTRACT

The new tax policy for indirect taxes in 2017 was a game-changer in the history of taxation in India. The amalgamation of indirect taxes led to the erosion of the state's power on taxation. The paper attempts to analyse the taxation policy of India with respect to Centre-state financial relations. It further explains the political and economic issues that led to the Centre-state disputes on IGST. The paper analyses the change in the distribution of revenue between the Centre and states after the introduction of GST by taking Kerala as a case study. The secondary data on the revenue distribution available with state and central government and the parliamentary discussions on the same are utilised for the analysis. Kerala is a consumer state. IGST act enables the state to apportion IGST. Moreover, it is the first state that revamped its department for destination-based uniform tax. The state has experienced significant decline in revenue after the introduction of GST. As per the GST Act 2016 the state is eligible to claim compensation as well. The paper discusses the conflicts between the state of Kerala and central government on distribution of IGST from 2017.