Clearly, the GST Bill and its supplementary bills are comprehensive pieces of legislation with well-defined objectives and the path to achieve them.
There are multiple benefits for the country.
First, an ideal GST regime can create a harmonised system of taxation by bringing all indirect taxes under a single tax. (Although it is important to note that this pan-India law shall not apply to Jammu and Kashmir, which will need to formulate its own law and integrate with the GST regime). This simplification can help eliminate the cascading effect of taxes and encourage much needed private investment. It will also reduce economic distortions arising from inter-state variations in taxes. Moreover, by creating a single-step tax collection system it can overcome complications of multiple steps involved in the collection of various taxes.
Politics has supported sound economics in this case, which is no mean feat for a country like India.
Second, improved voluntary tax compliance will go a long way towards helping raise tax revenues for the Centre as well as state governments. Given the poor performance of development indicators in India, much higher revenue levels are required for education, healthcare, poverty alleviation, and skill development. Since an insignificant proportion of India's population pays taxes, increasing the tax net via GST will help raise resources towards this objective. This shall eventually help improve holistic development indicators in India subject to optimal utilisation of resources.
Third, the states as well as the Parliament legislatures shall have concurrent powers to make laws on GST. To some extent, this addresses the issue often raised by state governments about their inability to affect their tax revenues.
Fourth, GST facilitates inter-state trade as transactions across state and municipal jurisdictions are free from tax. Thus it shall help transform India into a unified common market, boosting domestic trade and commerce.
Fifth, ratings agency Crisil notes that implementation of GST will reduce cost for companies by up to 30% over three-four years due to savings in warehousing cost and elimination of check posts.
Given its potential for reforming India's taxation regime, the GST Bill is a critical piece of legislative reform, and there has been a rare consensus among businesses and industries about the need for immediate passage of the Bill. The recent clearing of the four crucial supporting legislations by the Parliament therefore ushers in a new hope for India. From 2009 to 2016, the delay had already been long enough to deprive India of the potential benefits of moving to the GST regime. Fortunately, 2017 has finally succeeded in making amends. The final GST, with its multiple tax slabs (0%, 5%, 12%, 18% and 28%), is however a far cry from the "one nation, one tax" principle. Moreover, compliance issues shall likely continue and preparedness of the tax infrastructure will pose a big challenge. Even so, at the very least India has taken a significant step in the right direction. In addition, politics has supported sound economics in this case, which is no mean feat for a country like India. This is another landmark event in India's economic journey as indicated by the following remark, made back in 2014, by Michael Keen, Deputy Director- Fiscal Affairs Department, IMF:
"India's adoption of an integrated VAT, the GST, will be a major event. With more than 140 countries now adopting some form of VAT, India has long been a stand-out exception, along with (and this is no coincidence, as I will come on to) the United States. Adopting the GST will not be quite as impressive, perhaps, as putting an orbiter around Mars, but it will put India clearly ahead of the US."