The GST on Fiscal Consolidation in India: An Ambedkar Perspective on Fiscal Federalism

The Goods and Services Tax (GST), introduced in July 2017, aimed to create a unified market, improve compliance, and enhance revenue efficiency in India. This paper examines its impact on state-level fiscal consolidation-reduction of fiscal deficits and public debt-using an Ambedkarite framework emphasizing equity and state autonomy. Using panel data for 17 states (FY2013–FY2024) and a fixed-effects model, the study finds that GST improved tax buoyancy, with the indirect tax-to-GDP ratio rising from 5.4% to 6.2%. However, it is also associated with an increase in state fiscal deficits by about 0.35 percentage points of GSDP, particularly after the end of compensation in 2022, affecting less industrialized states more. From a B. R. Ambedkar perspective, GST enhances efficiency but weakens fiscal autonomy. The paper recommends permanent compensation, limited tax flexibility for states, and stronger equalization mechanisms to ensure balanced fiscal federalism.