Objective: E-Way bill The GST was justly endorsed by the government as leading tothe creation of One Tax, One Market, One India. But it is worth reflecting howfar India is from that ideal. Indian states have levied number of charges ongoods that hinder free trade in India—octroi duties, entry taxes, Central SalesTax (CST) to name a few.
The most egregious example of levying charges ofservices coming from other states is the cross-state power surcharge thatraises the cost of manufacturing, fragments the Indian power market andsustains inefficient cross-subsidization of power within states.The undisputed outcomes of these were queues of trucks,idling at state borders with their drivers struggling for official clearancesor being subject to extortion. The consequent damages to trade and economicactivity too have been extensively catalogued over the years. While internationalbarriers to trade have been studied extensively, less attention has beendevoted to studying the impact of trading networks and other barriers to tradewithin countries.Introduction of Goods and Services Tax (GST) nationwide witheffect from 1st of July 2017 is a very significant step in the Indian IndirectTax regime. This helps in the quick and easy movement of goods across Indiawithout any manual borders, all the check posts across the country areabolished.
The GST mechanism provides an Option of e-Way Bill, a document to becarried by the person in charge of conveyance, generated electronically fromthe common portal if value of the consignment exceeds Rs.50,000. the Goods andServices Tax (GST) Council approved the e-way bill as a mechanism to ensurethat goods being transported comply with the GST Law and is an effective toolto track movement of goods and check tax evasion. India’s Interstate andInternational Trade flows Country Year Interstate/GDP International/GDP Ratio of Interstate to International India (C+F form) 2015 54% 32% 1.7 India (C Form) 2015 32% 32% 1 China 2009 74% 45% 1.6 USA 2015 78% 31% 2.
5 India’s aggregate interstate trade (54 per cent of GDP) Thisbecomes all the more significant given that the data here covers mainlymanufactured goods, excludes agricultural products, and is therefore anunderestimate of total internal trade in goods. A substantial portion (almosthalf) of trade across states in India occurs as stock transfers within firms. Patterns of Interstate Trade: Arms-Length Trade Openness to Interstate Trade (Exports + Imports) The Above digram plots the value of domestic trade in Indianstates as a per cent of their GSDP. The most open states by this measure areUttarakhand, Goa etc. Assam and Bihar bringing up the rear, Karnataka is fairlyplaced but far behind form Goa in this regard. This is the first of manyindications that while India’s borders seem porous but is effected bygeographical and manmade (checkpost) barriers to trade.
Intrafirm Trade (as a per cent of GSDP) Intra-firm and Inter-firm Trade (per cent of GSDP) Intrafirm Trade Patterns The above graphs plots the intra-firm patterns of tradeacross states as a percentage of their GSDP. Goa tops the list when compared toother states in terms of trade accessibility but its quantum of intra-firmtrade is far higher than inter firm trade. Karnataka on the other hand has ahigher edge in Inter-firm trade when compared to Intra-firm trade nut it is yetto match Goa’s trade level.
India’s internal trade in goods seems surprisingly robust. Indiahas overcome language as a barrier to trade. There is enormous variation acrossstates in their internal trade patterns.
Smaller states like Goa tend to trademore, while the manufacturing states of Tamil Nadu, Karnataka tend to havetrade surpluses (exporting more than importing). Haryana and Uttar Pradeshappear to be manufacturing powerhouses because of their proximity to NCR.