Do Digital Payments SPUR GST Revenue: Indian Experience

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Abstract
This paper measures the effect of digital payments on enhancing goods and services tax (GST) revenue in India using monthly time-series information on tax collections and digital payments. By employing an autoregressive distributed lag cointegration framework, we find that the GST elasticity concerning digital transactions is about 0.54. The implication is that a one-standard-deviation increase in the value of digital transactions spurs GST revenue of about INR 62 billion, and a one-standard-deviation increase in index of industrial production (IIP) enhances GST revenue by about INR 8 to 12 billion. These results suggest that enhancing digital transactions is an effective way of increasing tax revenue.
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