Impact Of Goods And Services Tax On Industrial Growth Of Gujarat

Abstract

   India’s most important tax reforms took place in July 2017 with introduction of Goods and Services Tax (GST), which aims to improve tax efficiency by removing multiple tax systems. This paper studies how GST has affected industrial growth in Gujarat, which is one of the most industrialized states in India. This study examines the connection between GST intensity and industrial performance by using annual time-series data from 2011–12 to 2022–2023. In this study two econometric models are used to see the effects of GST on industrial growth. The first model studies the relationship between GST intensity (GST revenue collection relative to GSDP) and industrial growth, and second model tests for a structural shift in industrial performance using dummy variables for GST and the COVID‑19 pandemic. The models are studied using Ordinary Least Squares (OLS). The results shows that GST intensity does not have a statistically significant effect on industrial growth in Gujarat. Similarly, the structural dummy model does not provide strong evidence of a structural break in industrial growth after implementation of GST. However, the COVID‑19 pandemic shows a statistically meaningful negative impact on industrial growth during the study period. Overall, the findings shows that Gujarat’s industrial growth is influenced more by broader macroeconomic conditions rather than GST reform alone. The study contributes to the literature by providing state‑level evidence on the relationship between GST and industrial performance.