India’s Goods and Services Tax: Context, Design and Policy Spillovers

The 2017 Goods and Services Tax (GST) was one of most ambitious tax reforms introduced in
India. This paper documents the context in which the GST was introduced – particularly the
regional disparities in economic capacity, discusses design challenges in developing the GST,
and the basic contours of the newly introduced GST. The paper advances two arguments. First,
the he efficacy of India’s tax reform must be assessed in the context of federal transfers and
larger spillovers of the GST to the economy. Further, there is a compelling necessity to review
and recalibrate the entire gamut (and not piecemeal) of federal relations – tax, expenditure and
transfers. This is critical to ensure the stability and predictability needed to ensure that India’s
state driven growth blossoms and attains full fruition.