India switched to the goods and services tax (GST) on Friday night, in what has been described as the largest reform of the country’s tax system. A column published as the new regime began asked a simple question: will ordinary people end up better off?

A shift in federal powers

The column argued that GST is more than a new way of collecting tax. In its view, the change also reshapes India’s federal arrangement, because the states are surrendering what is arguably their most significant power, the power to levy taxes. It noted that federal countries around the world follow a range of different taxation models.

Complexity remains

According to the column, the promise of simplicity is weakened by the design of the system:

• Instead of a single GST rate there will be several, with different goods and services taxed at different levels.
• Businesses must register with the central tax authority and also with the tax authority of every state in which they want to operate.

The column argued that both features add cost and complexity, and that whether people gain will depend on the effective rate applied in each state.

Background

GST came into force on 1 July 2017.

See also: Election news

Originally published on 1 July 2017. Rewritten on 9 October 2026.

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