Should Citizen-Oriented Electronic Public Services be Taxed? Perspectives from the Indian State of Andhra Pradesh

Abstract

The citizen-oriented electronic services delivery project implemented by the office of ESD- Meeseva is one of the prestigious and successful e-Government initiatives in the Indian state of Andhra Pradesh. The project is implemented by the government while the operations and maintenance of the service centers in the state are outsourced to the private sector. The project is sustained by user charges which are collected by the private sector and so attract levies of service tax and goods and services tax. This study analyzes the impact of the tax on the revenue flow to the service providers and village level entrepreneurs in the project. Using data from the office of the ESD-Meeseva, the study finds that the tax squeezes the margins for the service providers and the village level entrepreneurs which affects its commercial viability, and creates deadweight loss, which adversely impacts societal welfare. While making a case for eliminating the tax levies, the study suggests alternative options for improving the efficiency of the citizen-oriented electronic services.