The paper evaluates the Indian tax system based on productivity and stability from 1990-91 to 2015-16, using time series analysis. It was found that the tax elasticity and tax buoyancy are either one or greater than one for all major taxes except custom duty; this indicates that the government mainly relies on domestic taxes. The policy examines the effects of discretionary changes on tax productivity. The paper largely raises questions about over-dependency and the challenges faced by the government in raising taxes through indirect taxes (GST), given the limitations of the tax base in direct taxes

tax buoyancy, policy examines, tax stability

The Indian tax system has maintained a tolerable level of tax productivity, as the tax elasticity and tax buoyancy both values are close to 1 during the study period. The central government has performed comparatively better in the case of direct taxes, which have proved more productive than indirect taxes, except for service tax. All taxes except excise duty, the discretionary changes have generated a negative impact on revenue productivity. Even after the implementation of GST, the government should remain more concerned about the productivity of indirect taxes. Overall, the Indian tax system is quite stable on the basis of CV, but the revenue from direct taxes and service tax is comparatively unstable. The RSC value reflects the inclusion of all taxes in TTR, which has generated stability in the tax system except for the service tax. The interpretation of CV(R)2 value is consistent with reflection of the RSC value as well as the value of CV that inclusion of service tax has brought instability in tax system, the reason for instability of service tax may be as it was introduced in 1994-95 with few selected services and gradually other services were included under it. The study concludes that the overall Indian tax system has remained revenue productive and stable during 1990-91 to 2015-16

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