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.

1. http://www.iaeme.com/IJM/index.asp 12 editor@iaeme.com
International Journal of Management (IJM)
Volume 7, Issue 3, March-April 2016, pp. 12-17, Article ID: IJM_07_03_002
Available online at
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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 CENTAL 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 Cental 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:

2. Indirect Tax Revenue - An Assessment Of Cental V/S State Government
http://www.iaeme.com/IJM/index.asp 13 editor@iaeme.com
 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

3. Vineet Singh and Abhinna Srivastava
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Figure 1 Indirect Tax Revenue of Central Government
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
-20
-10
0
10
20
30
40
50
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Indirect Tax Revenue of Central Government
Indirect Tax Revenue (Rs. In Crores) % increase

4. Indirect Tax Revenue - An Assessment Of Cental V/S State Government
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Figure 2 Indirect Tax Revenue of State Government
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
0
5
10
15
20
25
30
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Indirect Tax Revenue of State Government
Indirect Tax Revenue (Rs. In Crores) % increase

5. Vineet Singh and Abhinna Srivastava
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Figure 3 Indirect Tax Revenue: Central v/s State Government (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.
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
InDirect Tax Revenue (Central v/s State Govt.)
Indirect Tax Revenue (Central Govt.) (Rs. In Crores)
Indirect Tax Revenue (State Govt.) (Rs. In Crores)

6. Indirect Tax Revenue - An Assessment Of Cental V/S State Government
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t-Test: Two-Sample Assuming Unequal Variances
Parameters
Indirect Tax Revenue (Central
Govt.)
Indirect Tax Revenue (State
Govt.)
Mean 244009.2 249359.6
Variance 7105853336 12975234516
Observations 10 10
Hypothesized Mean Difference 0
df 17
t Stat -0.119396785
P(T<=t) one-tail 0.453180313
t Critical one-tail 1.739606716
P(T<=t) two-tail 0.906360626
t Critical two-tail 2.109815559
Since the calculated value of t two tail at .05 level of significance is less than table
of t, alternate hypothesis is rejected and null hypothesis is accepted; hence it can be
concluded that there is no significant difference between indirect tax revenue
collected by central government and state government.
CONCLUSION
On the basis of above analysis it can be concluded that state governments are able to
generate more funds as compared to central government through indirect tax revenue,
during the study period. 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 during the study period. In addition the above study
also reveals that there is no significant difference between indirect tax revenue
collected by central government and state government from 2002-03 to 2011-12.
REFERENCES
[1] Http://Mospi.Nic.In/Mospi_New/Upload/Statistical_Year_Book_2011/Sector-1-
India%20an%20overview/Ch-06-Direct%20&%20indirect%20taxes/Direct-
Indirect%20tax-Writeup.Pdf
[2] Statistical Methods, S.P. Gupta, Sultan Chand & Sons, 2005
[3] Taxation (Direct & Indirect), Dr. Vinod K. Singhania, Dr. Monica Singhania,
Taxman’s, 2013
[4] https://en.wikipedia.org/wiki/Tax
[5] https://en.wikipedia.org/wiki/Taxation_in_India
[6] https://en.wikipedia.org/wiki/Income_tax_in_India
[7] http://portal.indiainfoline.com/datamonitor/Public-Finance-Annually/Central-
State-Govt-Finance-Combined/Direct-and-Indirect-Tax-Revenues-of-Central-
and-State-Governments.aspx
[8] Vineet Singh and Abhinna Srivastava. Direct Tax Revenue: A Case Study of
Central V/S State Government. International Journal of Management, 6(12),
2015, pp. 83-88.
[9] Vineet Singh and Abhinna Srivastava. Receivables Management in Leading
Heavy Electrical Industries in India. International Journal of Management, 6(4),
2015, pp. 01-08.