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

The citizen-oriented electronic services delivery project (implemented by the office of ESD-Meeseva) is one of the prestigious and successful e-Government initiative in the Indian state of Andhra Pradesh. The project is implemented by the Government with the participation of the private sector where the operations and maintenance of the service centers in the state are outsourced. The project is sustained through the collection of user charges by the private sector, and so, attracts a levy of service tax and presently, the goods and service tax. The study analyzes the impact of the tax on the revenue flow to the service providers and the 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 entrepreneurs which affects its commercial viability, and creates dead weight loss which adversely impacts societal welfare. While making out a case for eliminating the tax levy, the study suggests alternative options for improving the efficiency of the citizen-oriented electronic services.