Objective: mechanism to ensure that goods being transported comply

Objective: E-Way bill 

The GST was justly endorsed by the government as leading to
the creation of One Tax, One Market, One India. But it is worth reflecting how
far India is from that ideal. Indian states have levied number of charges on
goods that hinder free trade in India—octroi duties, entry taxes, Central Sales
Tax (CST) to name a few. The most egregious example of levying charges of
services coming from other states is the cross-state power surcharge that
raises the cost of manufacturing, fragments the Indian power market and
sustains inefficient cross-subsidization of power within states.

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The undisputed outcomes of these were queues of trucks,
idling at state borders with their drivers struggling for official clearances
or being subject to extortion. The consequent damages to trade and economic
activity too have been extensively catalogued over the years. While international
barriers to trade have been studied extensively, less attention has been
devoted to studying the impact of trading networks and other barriers to trade
within countries.

Introduction of Goods and Services Tax (GST) nationwide with
effect from 1st of July 2017 is a very significant step in the Indian Indirect
Tax regime. This helps in the quick and easy movement of goods across India
without any manual borders, all the check posts across the country are
abolished. The GST mechanism provides an Option of e-Way Bill, a document to be
carried by the person in charge of conveyance, generated electronically from
the common portal if value of the consignment exceeds Rs.50,000. the Goods and
Services Tax (GST) Council approved the e-way bill as a mechanism to ensure
that goods being transported comply with the GST Law and is an effective tool
to track movement of goods and check tax evasion.

India’s Interstate and
International 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) This
becomes all the more significant given that the data here covers mainly
manufactured goods, excludes agricultural products, and is therefore an
underestimate of total internal trade in goods. A substantial portion (almost
half) 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 Indian
states as a per cent of their GSDP. The most open states by this measure are
Uttarakhand, Goa etc. Assam and Bihar bringing up the rear, Karnataka is fairly
placed but far behind form Goa in this regard. This is the first of many
indications that while India’s borders seem porous but is effected by
geographical 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 trade
across states as a percentage of their GSDP. Goa tops the list when compared to
other states in terms of trade accessibility but its quantum of intra-firm
trade is far higher than inter firm trade. Karnataka on the other hand has a
higher edge in Inter-firm trade when compared to Intra-firm trade nut it is yet
to match Goa’s trade level.

 

India’s internal trade in goods seems surprisingly robust. India
has overcome language as a barrier to trade. There is enormous variation across
states in their internal trade patterns. Smaller states like Goa tend to trade
more, while the manufacturing states of Tamil Nadu, Karnataka tend to have
trade surpluses (exporting more than importing). Haryana and Uttar Pradesh
appear to be manufacturing powerhouses because of their proximity to NCR.