The coming into force of the Goods and Services Tax (GST) will unify the nation into a common economic market, obviating the need for goods to be taxed each time they cross a state border. Much of the current discussion about GST has focused on the tax structure and the complexities surrounding the implementation of the new system.
Less appreciated is the fact that GST, by changing all aspects of business, from the location of production and investments to logistical and supply-chain optimisation, could fundamentally alter the economic geography of India.
Prior to GST, the internal movement of goods was subject to a number of barriers. First, and most directly, there were taxes on the inter-state movement of goods and cross-state differences in VAT structures. Second, there were cumbersome inspections, especially at state borders. A recent World Bank-funded study, undertaken by the Ministry of Road Transport and Highways, used GPS-time-stamped data of freight trucks (collected by the innovative Bengaluru-based logistics company, Blackbuck) to suggest that roughly 20 per cent of the transit time is spent at the border on verification of documents.