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GST, Digitalisation and Inclusive Growth in India: Evidence from State-Level Fiscal Indicators
Subject area: Arts, Social Sciences and Humanities · Area of research: Taxation
DOI: 10.64388/ire1725144
Abstract
The introduction of the Goods and Services Tax (GST) in India represented a major transformation of the country's indirect tax system. Beyond revenue collection, GST has also influenced tax digitalisation, economic formalisation and the fiscal relationship between the Union and State governments. This study examines the relationship between GST revenue performance, digital tax intensity, economic formalisation and inclusive growth, while also considering the implications for state fiscal capacity. A balanced panel representing 20 Indian states over the period 2015–16 to 2024–25 was constructed, resulting in 200 state-year observations. Fixed-effects regression, correlation analysis, diagnostic testing and mediation analysis were employed. The results indicate that GST revenue performance and digital tax intensity are positively associated with economic formalisation. Formalisation, in turn, demonstrates a significant positive relationship with inclusive growth. Mediation analysis indicates that formalisation partially mediates the relationship between GST revenue performance and inclusive growth. GST performance is also positively associated with state fiscal capacity, although the magnitude of the relationship varies across states. The findings suggest that GST should not be assessed solely in terms of tax collections. Its broader significance lies in its potential to strengthen digital tax administration, expand the formal economic base and enhance the fiscal capacity available for developmental expenditure.
Keywords
GST, digitalisation, inclusive growth, formalisation, fiscal federalism, state finances, India
References
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[2] Goods and Services Tax Council (2024). The GST saga: A story of extraordinary national ambition. Government of India, New Delhi.
[3] Goods and Services Tax Council (2026a). About GST and the GST Council. Government of India, New Delhi.
[4] Goods and Services Tax Council (2026b). The GST Council. Government of India, New Delhi.
[5] Mukherjee S (2025). Reflecting on the past to plan the future: Revenue performance evaluation of Indian GST. National Institute of Public Finance and Policy, New Delhi.
[6] NITI Aayog (2026). State finances and coordination. Government of India, New Delhi.
[7] Paramasivam P, Rangasamy V, Elango R (2026). GST collection in India (2017–2026): An empirical study of fiscal federalism and revenue performance. Asian Journal of Economics, Business and Accounting, 26(4), 354–362.
[8] [Author not given] (2026). Digital compliance and revenue buoyancy under India’s Goods and Services Tax: Evidence from 2017 to 2024. Cogent Business & Management.
How to cite this paper
@article{1725144,
author = {Dr. C. Arun Kumar, Dr. Samuel A, Dr. Sathyanarayanan S R, Dr. Prabakaran V, Dr. S. Dheepalakshmi},
title = {GST, Digitalisation and Inclusive Growth in India: Evidence from State-Level Fiscal Indicators},
journal = {Iconic Research And Engineering Journals},
year = {2026},
volume = {10},
number = {5},
pages = {2775-2783},
issn = {2456-8880},
url = {https://www.irejournals.com/formatedpaper/1725144.pdf},
abstract = {The introduction of the Goods and Services Tax (GST) in India represented a major transformation of the country's indirect tax system. Beyond revenue collection, GST has also influenced tax digitalisation, economic formalisation and the fiscal relationship between the Union and State governments. This study examines the relationship between GST revenue performance, digital tax intensity, economic formalisation and inclusive growth, while also considering the implications for state fiscal capacity. A balanced panel representing 20 Indian states over the period 2015–16 to 2024–25 was constructed, resulting in 200 state-year observations. Fixed-effects regression, correlation analysis, diagnostic testing and mediation analysis were employed. The results indicate that GST revenue performance and digital tax intensity are positively associated with economic formalisation. Formalisation, in turn, demonstrates a significant positive relationship with inclusive growth. Mediation analysis indicates that formalisation partially mediates the relationship between GST revenue performance and inclusive growth. GST performance is also positively associated with state fiscal capacity, although the magnitude of the relationship varies across states. The findings suggest that GST should not be assessed solely in terms of tax collections. Its broader significance lies in its potential to strengthen digital tax administration, expand the formal economic base and enhance the fiscal capacity available for developmental expenditure.},
keywords = {GST, digitalisation, inclusive growth, formalisation, fiscal federalism, state finances, India},
month = {November},
doi = {https://doi.org/10.64388/ire1725144}
}