We assess the revenue potential of states in the Passenger and Goods Tax (PGT) collection based on available information in the public domain. Taxes on Goods and Passengers (also known as PGT) is a tax on services provided by commercial vehicles for carrying goods and passengers on roads or inland waterways. This tax is not subsumed into the GST, except under Entry 52 of the State List (List II of the Seventh Schedule of the Indian Constitution) “Taxes on the entry of goods into a local area for consumption, use or sale therein” (also known as entry tax) has been subsumed into the GST, as per the Constitution One Hundred and First Amendment Act, 2016.

 

Many states do not exercise the taxation power of PGT, and there is scope for reforms in this tax handle in terms of revising the tax rate structure and expanding the tax base. With the increasing penetration of Electric Vehicles (EVs) both in passenger and goods transport fleets in India, it will be important to explore possibilities of shifting points of taxation from owning the vehicle (e.g., registration fee and associated taxes) and consumption of fuels (fossil) to uses (mobility) of the vehicle. Any tax on the mobility of the vehicles could be introduced using the provisions under the PGT Act of state governments.

 

Key Words: Revenue potential, State Finances, Taxes on passengers and goods, Externalities, Tax on Mobility, India.   

 

JEL Codes: H20, H71, H23, I18. 

 

Acknowledgements: This study was made possible with the support of the Government of the United Kingdom's Foreign, Commonwealth & Development Office (FCDO). Dr. R. Kavita Rao's valuable comments and suggestions have greatly contributed to the depth and relevance of this research.