Tax Buoyancy in Assam: An Empirical Exploration

Abstract

An attempt has been made in this paper to analyse the tax buoyancy rate of Assam state empirically. Tax buoyancy is crucial for a state, as it indicates how well tax revenue grows with economic activity (GDP), supporting efficient fiscal planning, reducing reliance on debt, and enabling better funding for public spending without raising rates. The indirect tax structure in India underwent a fundamental transformation from fragmented to integrated when sales tax was replaced by Value Added Tax (VAT) in 2005, and further Goods and Services Tax (GST) in 2017, which combined several indirect taxes (such as VAT, Excise Duty, Service Tax, and CST) into a single destination-based tax. This created a common national market, eliminated the cascading effect (tax on tax), made compliance easier with unified forms, and enabled seamless Input Tax Credit (ITC) across states. Therefore, it is very significant to examine how state GST implementation enables the state to make use of its tax base (GSDP) in order to boost revenue mobilisation and, consequently, tax buoyancy. In this regard, the primary goal of this paper is to investigate the effects of state GST on the tax buoyancy of Assam, and the tax to GSDP ratio before and after the implementation of the state GST. In addition, the regression results of different minor heads under Own Tax Revenue are also investigated. The study found that tax buoyancy was 0.79 between 2010-11 and 2016-17, showing that own tax revenue increased more slowly than state revenue. On the other hand, the tax buoyancy rose to 1.10 between 2017-18 and 2024-25, suggesting that tax revenue expanded more quickly than state revenue. This reflects a significant improvement in the efficiency and responsiveness of the tax system in Assam. The implementation of the Goods and Services Tax (GST), improved tax compliance, better administration, and overall economic growth are some of the reasons for the higher buoyancy.