Any efficiency measure automatically results in saving of resources. The passing of the General Sales Tax Bill by the Centre recently is a big move that will not only save tax but will reduce waste. For example, the abolition of entry tax means that hold up of trucks at every state border will disappear or the time taken will be reduced sharply. This will enhance efficiency of Indian goods transport system which is abysmal today.
The rationalization of tax structure also means massive reduction in paperwork, hence consumption of paper and then the storage space. The removal of need to have warehouses in every state could also result in saving of resources. Economists believe GST could add two percent to India’s GDP – a substantial amount the government can use for investing in primary education, health and conservation.
Abolition of entry tax could have a substantial impact on free flow of agricultural products across the country. Currently the state-level barriers had imposed stifling barriers on free movement of farm products. This may also help farmers get better prices as they have better flexibility to move their produce to markets which offer better price.
The flip side of GST is that the cost of many goods could drop which will spike consumption levels. But growth also means more jobs.